IR35 - Step 1 in surviving IR35

IR35 - Step 1 in surviving IR35 - By: Antony, Posted on: 2007-07-21

The Intermediaries Legislation, more usually known as IR35, was first adopted towards the start of 2000. When it was introduced, it was supposed to stop workers from avoiding paying tax, and enforce the mandatory National Insurance Contribution (NIC). It would do this by forcing certain companies to pay the same tax as their employees.

Obviously, people have not liked this, especially freelancers who frequently take considerable risks in their business. Almost all freelancers are self employed, and so can easily be caught out by this new tax. A contract that is well phrased and clear will be fine, but the smallest mistake in word choice can be enough to sink you.

The simplest and safest solution is to have all contracts reviewed by an IR35 expert before signing. There are many review providers and the average price is around 120. Given that the review could result in a tax saving of tens of thousands of pounds in an IR35 enquiry, it is a false economy to put off getting a review.

So let's go over some of the key factors that you need to consider. Here are a few questions that may help you determine if your contract is likely to pass.

1. If you fail, does your company bear the financial risk of it? [Yes = Good]

2. Does your company profit from sound management in performing a contract? [Yes = Good]

3. Is your contract specific to you, or does your company have the right to send alternative personnel? [Yes = Good]

4. Is your company responsible for any bad debts? [Yes = Good]

5. Is your contract a "Contract for services" rather then a "Service contract"? [Yes = Good]

6. Are you eligible for holiday or sick pay? [No = Good]

7. Is the relationship between you and your client one of "master and servant"? [No = Good]

8. Do you and your client have mutuality of obligations? [no = Good]

If you are a UK freelancer and all of the above check out in your case, then you might stand a good chance of staying outside IR35. But a word of warning about contracts: It's not just about WHAT is written, but also the WAY it is written. When reviewing contracts, IR35 experts look very closely at wording and phrasing. They know that poor wording can create a chink in your armour that the tax authorities can exploit.

So, the first step in making sure you are completely in the clear with regards to IR35 is to contact an expert reviewer. Get them to take a look at your contract, and sound out anything that might trip you up. Just be sure you get thsi done before you put pen to paper and actually sign it.

Article Source:- Directory Submission & Sexy Deepika Padukone

This page has been provided by the companies Home Loans Direct and Small Business & IR35 Contractor Accountants Antony J. Holdsworth & Co.

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