IR35 Are you affected?
Factors of the IR35 testing.
In determinig whether the IR35 test is passed or failed a number of factors are considered.
For instance:
– Can the worker hire a substitute to do the work, or must he do it himself – a specialist field etc.?
– Does the contractor have any inclination on when and how they work?
– Is there a financial implication on success as well as fail?
– Does any of the financing come from the contractor?
– Is there ‘mutuality of obligation’? (i.e. is the client obliged to provide work and the worker to do it?)
– How many contracts does the contractor currently have?
– what is the pay structure (e.g. is the contractor paid by the a set rate hourly/daily)
There is no hard and fast test – it is the ‘overall picture’ which matters. There is considerable literature on the operation of IR35 – for example on the HMRC website
Workers can send copies of contracts to the Revenue for a ruling on whether the contract passes or fails the IR35 test. Such a ruling will depend on all facts being given and the contract being an accurate reflection of the reality of the situation.
Passing the test
If the IR35 test does not apply, payments from the client can be paid into the limited company, taxed under the beneficial corporation tax rates and then taken out from the company as dividends (with potentially lower overall rates of tax and free of NICs).
Failing the test
If the IR35 test applies, the work is termed a ‘relevant engagement’. All income from such ‘relevant engagements’ is taxed, broadly, as if the worker is an employee – i.e. it is subject to PAYE and NICs.
For more information or advise please contact us here at CASA on 07798 873077 ([email protected]) where we will be happy to help.
In determinig whether the IR35 test is passed or failed a number of factors are considered.
For instance:
– Can the worker hire a substitute to do the work, or must he do it himself – a specialist field etc.?
– Does the contractor have any inclination on when and how they work?
– Is there a financial implication on success as well as fail?
– Does any of the financing come from the contractor?
– Is there ‘mutuality of obligation’? (i.e. is the client obliged to provide work and the worker to do it?)
– How many contracts does the contractor currently have?
– what is the pay structure (e.g. is the contractor paid by the a set rate hourly/daily)
There is no hard and fast test – it is the ‘overall picture’ which matters. There is considerable literature on the operation of IR35 – for example on the HMRC website
Workers can send copies of contracts to the Revenue for a ruling on whether the contract passes or fails the IR35 test. Such a ruling will depend on all facts being given and the contract being an accurate reflection of the reality of the situation.
Passing the test
If the IR35 test does not apply, payments from the client can be paid into the limited company, taxed under the beneficial corporation tax rates and then taken out from the company as dividends (with potentially lower overall rates of tax and free of NICs).
Failing the test
If the IR35 test applies, the work is termed a ‘relevant engagement’. All income from such ‘relevant engagements’ is taxed, broadly, as if the worker is an employee – i.e. it is subject to PAYE and NICs.
For more information or advise please contact us here at CASA on 07798 873077 ([email protected]) where we will be happy to help.