IR35 Guidance

What is IR35?

It refers to the United Kingdom’s new Anti-Avoidance Tax legislation designed to tax ‘disguised employment’ at a rate similar to PAYE employment, e.g. an individual who would have normally been an employee paying NI and tax contributions, instead of contracting out to being a Limited Company.

Who will be affected?

IR35 will affect all Limited Company workers in the UK, regardless of sector, e.g. consultants, doctors, nurses, care workers, IT and many more.

When will this happen?

The Government has postponed this reform from April this year until 2021 due to the pandemic.

However, some Clients are already implementing these rules, and are wanting to use PAYE workers only, so it is important that if you work as a Limited Company, you understand your liability and responsibility and obtain some relevant financial advice, as we are not financial advisors. The Client cannot ignore this legislation and therefore does not want to run the risk of being penalised for any unintended wrong doing by the Limited Company worker.

Opting out of a Limited company?

If you switch to PAYE, your tax and national insurance will be deducted by the Agency, as you are then on their payroll, also receiving holiday pay and optional pension contribution. Your Net pay will appear lower than your Limited Company rates but it is very important to bear in mind that your Limited company rates are Gross, and you or your accountant would then have to work out all the above relevant deductions you owed to HRMC, as well as other applicable fees incurred. Going on to PAYE with the Agency would avoid your having to handle all these responsibilities and also avoid making any mistakes with the HRMC, for which you will be penalised.


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