IR35 Since the now infamous pre-Budget anouncement on 9th March 1999, Inland Revenue press release number 35 has caused much concern and problems for those workers who trade through a personal service company, particularly contractors in the IT. Typically, an annual tax saving of £12,000 can be secured if your affairs can be structured to fall outside of IR35. This arises through drawing profits from your personal service company in the most tax efficient remuneration manner (small salary + balance as dividends), rather than the high salary structure required if ‘caught’ by IR35. All such businesses must assess their current IR35 risk exposure (via example IR35 checklist) and decide which of the following options is most relevant to them: If it appears IR35 does apply: Accept that IR35 cannot be avoided, and: Comply with the prescriptive requirements of paying a high actual or ‘deemed’ salary through your own personal service company (Deemed Payment HMRC calculation tool). Cease trading through your own personal service company and transfer onto the payroll of an umbrella company, Cease trading through your own personal service company and try and transfer onto the payroll of your ultimate client. Amend your documented contractual terms and work practices to ensure you fall outside of IR35, If it appears IR35 does not apply, optimize your remuneration structure and: Continually improve documented contractual terms and work practices to evidence and strengthen your opinion that IR35 does not apply. One of our more popular IR35 services involves us reviewing your current work practices and written contract and providing an opinion on how we believe HM Revenue & Customs would catagorise you. We will prepare a detailed report on the positive, neutral and negative aspects of your current arrangements and make practical suggestions on improvements you may wish to consider, if commercially acceptable to both you and the client. Clients who are fearful that their IR35 situation may be investigated by HM Revenue & Customs, through a corporation tax return enquiry or PAYE control visit, may wish to consider taking out our tax investigation insurance. Whether or not IR35 applies, we offer a mix of services that most Contractors will need, as back office support, to run their business: Book-keeping, Payroll, VAT Returns (often under the Flat Rate VAT scheme), Company Secretarial, Statutory Accounts, Corporation Tax, Personal Tax, Pro-active tax, finance and business advice. We intimately understand how important to you it is that you stay outside of the requirements of IR35. We also understand how you need to be told the truth, even if it means IR35 does apply and probably always will.
