IR35

Tax Solicitors IR35

Contractors, and organisations who use contractors, need to familiarise themselves with the off-payroll working rules – known more commonly as the IR35 rules.

If these laws are not properly implemented, the consequences could be high for each party. Hiring companies found to be using ‘disguised employees’ could be liable for any shortfalls in tax and National Insurance contributions. On the other hand, contractors who are wrongly determined as employees could face greater tax bills – and possibly even a reduction in pay.

As experts in HMRC tax laws, we can help you –

  • Understand the IR35 rules
  • Clarify whether the IR35 rules affect you or your business
  • Provide guidance on whether someone is employed or self-employed for tax purposes
  • Deal with a status determination dispute
  • Deal with any HMRC investigation or enquiries relating to IR35

For legal advice regarding the off-payroll working rules (IR35), contact us at Altion Law. Our specialist lawyers can clarify your legal rights and liabilities, help you dispute a status determination decision, and assist your business in understanding the requirements and how they affect you.

Call us today on 01908 414990, email us at hello@altion-law.co.uk or make a  free enquiry  and we will call you back.

Understanding the IR35 Rules

The IR35 rules were first introduced in 2000 to crackdown on alleged tax avoidance. They target self-employed contractors who bill for their services via a personal services company (PSC), such as a limited company. HMRC is concerned that some contractors are really employees, and so should pay employment taxes, rather than corporate taxes.

Until 2017, contractors could decide whether they were employed or self-employed for tax purposes. However, this changed in 2017 when hiring companies in the public sector were told to make the decision instead. As of April 2020, the same rules apply to contractors in the private sector working for medium to large organisations.

If you’re a contractor, or an organisation which uses freelance contractors, you need to know whether you fall within the scope of the IR35 rules. If so, the hiring company needs to make a Status Determination Statement. In other words, it must decide whether its contractors are self-employed or employed for tax purposes.

As a contractor, you can provide the hiring company with information to aid their decision. Ultimately, however, the decision is taken out of your hands. Nevertheless, if you disagree with the determination, there is action you can take.

Not every single contractor is affected by the IR35 rules, and nor is every single organisation which uses self-employed freelancers.

The IR35 rules apply to contractors who –

  • Work through an intermediary, such as their own limited company
  • Provide services to public sector organisations or medium to large private sector organisation.

The IR35 rules apply to all public sector organisations. From April 2020 they will also apply to private sector organisations that meet two of the following conditions –

  • An annual turnover of more than £10.2 million
  • A balance sheet total of more than £5.1 million
  • More than 50 employees

The IR35 rules also apply to organisations that have an annual turnover of more than £10.2 million and are not –

  • A company
  • A limited liability partnership
  • An unregistered company
  • An overseas company

How do you know if a contractor should be considered employed or self-employed for tax purposes? The decision depends on various factors, including –

  • The contractor’s duties
  • Substitutes and helpers
  • The working arrangements
  • The contractor’s financial risk
  • The contractor’s involvement with the organisation
  • The details of the contract

For example, someone could be considered employed for tax purposes, if the client –

  • Has the right to refuse a substitute contractor
  • Decides how the work is done (unless it is highly skilled work)
  • Decides the contractor’s working hours and work location
  • Prevents the contractor from working for their competitors
  • Is offering a series of contracts, or is able to extend the contractor’s current contract

Also, a contractor could be considered employed for tax purposes, if he/she –

  • Is given paid-for corporate benefits
  • Is an office holder
  • Holds management responsibilities
  • Must introduce themselves to the client’s suppliers or consumers
  • Must ask for permission to work for other clients
  • Spends the majority of their working time for one client

You can use the government’s online tool to check employment status for tax.

Expert Legal Advice

If you are facing an IR35 dispute, early legal advice is recommended. At Altion Law, we specialise in tax law disputes. We offer professional legal advice to hiring companies, recruitment agencies and freelance contractors who are affected by the off-payroll working rules.

This is a complex area of the law. It is also one with costly implications, if the rules are not applied correctly. We can provide clear guidance to help you to ensure that you comply with the law, while at the same time working to secure a positive outcome.

  • If you are contacted by HMRC in relation to IR35 we can assist with any investigation.
  • If you are a contractor who is unhappy with a status determination, we can advise whether there are grounds to pursue the dispute process. If so, we can draft a letter on your behalf, explaining why the decision should be reversed.
  • Alternatively, if you are a hiring company, we can assess the accuracy of the original decision. If the determination remains unchanged, we can respond to the letter, stipulating the reasons for the contractor’s employment status.
  • If the dispute process does not produce a resolution, we can advise you on the next steps. This may involve negotiation or further legal action.

HMRC Tax Solicitors

For legal advice regarding the off-payroll working rules (IR35), contact us at Altion Law. Our specialist lawyers can clarify your legal rights and liabilities, help you dispute a status determination decision, and assist your business in understanding the requirements and how they affect you.

Call us today on 01908 414990, email us at hello@altion-law.co.uk or make a free enquiry and we will call you back.

Make A Free Enquiry

For a free enquiry, call us today on 01908 414990, email us at hello@altion-law.co.uk or complete our free enquiry request for a free, confidential and no obligation discussion and let one of our expert team discuss your situation and the options available to you.