What is IR35?

IR35 is tax legislation that aims to stop individuals from avoiding tax by supplying their services to the client through an intermediary, such as a limited company (Personal Service Company – PSC).

The legislation is designed to identify contractors and businesses that are avoiding paying the appropriate tax by working as what HMRC refers to as ‘disguised employees’, or are engaging workers on a self-employed basis to ‘disguise’ their actual employment status.

IR35 is a term that is now used collectively to describe the original and more recent relevant parts of the Income Tax (Earnings and Pensions) Act. These deal with the ‘old’ IR35 rules, which were the responsibility of the contractor to operate, and the ‘new’ IR35 rules, where other parts of the supply chain have responsibilities as well. The new and old IR35 can both potentially be relevant after April 2021, depending on the nature of the supply chain. Off-payroll is also used to describe the same collection of tax laws.

For future guidance on the IR35 reforms in the private sector, download our guide for agencies and end hirers:

Download FCSA IR35 Guide

The government has also published guidance on ‘Understanding off-payroll working (IR35)’ on their website.

 

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