IR35 Consulting | Optima Services Ltd
At Optima Services Ltd, we appreciate the fact that it can be challenging to stay updated with legislation updates and getting to grips with them to ensure that you’re compliant. This is why we work to help you understand the latest changes, including the recent IR35 legislation amendments.
What is IR35?
For those that are new to IR35, you might be wondering exactly what it is and if it applies to you. Well, in simple terms, it is an intermediary legislation reference code that’s used to describe two kinds of tax laws in the Finance Act. They are designed to help fight tax avoidance from employees and employers.
The New Changes
Contractors that continue operating as limited companies are expected to pay themselves as employees of their respective limited companies. This means that they are subject to Corporation Tax, PAYE, and National Insurance deductions.
This would mean that for contractors, if you’re working with an end client or an agency that directly invoices you as a director or as self-employed, you are not be allowed to pay yourself self-employed salary, offset expenses, or dividends.
They are designed to help fight tax avoidance from employees and employers
Who It Applies To?
If you’re a contractor, consultant, or freelancer working independently with your own equipment and tools and without anyone else in your own business, and you’re providing services to multiple clients, the rules might not be applicable to you.
Still, there are tools that are available through the HMRC to determine your current IR35 status. But just as with many similar tools, these are not necessarily straight-forward to use, unless you have specific experience using them. It’s therefore best to discuss your options with an accounting professional to better understand your IR35 status.
Am I Compliant?
It’s up to you to ensure that you’re IR35 compliant – this also includes recruitment agencies. To understand if you may continue working as a freelancer, sole trader, or limited company owner, you should know about Supervision, Direction, and Control (SDC). This will determine your true employment status.
To learn more about SDC, check out the HMRC website. If you don’t fall within the aforementioned categories, it’s likely you don’t fall within IR35. But if you do fall within one of them, then you are likely be affected. These laws came into effect in April 2021. So, contractors have to be IR35 compliant from this date.
Supervision
This applies when another person or entity is overseeing the work of another person. This is to make sure the work is completed correctly and to the right standard.
Direction
This requires the person doing the work to be directed by another person and make sure that they complete the work to a certain standard or instruction list, while also advising them along the way.
Control
This is when a person chooses the kind of work an employee does and how they do this work. This controller is able to move the employee from one task to another as work evolves and priorities change.
Learn More About IR35!
If you want to learn more about IR35 or discuss your IR35 status, don’t hesitate to contact a member of the Optima Services Ltd team.
