What is IR35 and how does it affect you?

What is IR35?

IR35 is the UK’s anti-avoidance tax legislation, addressing those that do not meet HMRC’s definition of self-employment. The purpose is to tax those who are effectively disguising their employment by receiving payments from a client via an intermediary. This could be, for example, their own limited company. The IR35 tax legislation addresses what is effectively “hidden employment” and ensures that those it applies to will be taxed at a similar rate to those employed.

Why was it introduced?

Prior to the existence of IR35, those who owned their own limited companies could receive payments from clients direct to the company. This revenue could then be used in the same way as any small company, such as:

  • Company profits being distributed as dividends (not subject to National Insurance payments)
  • Workers saving tax by splitting ownership of the company with family members to allocate income into lower tax bands.

The latter of these two practices is considered to be tax fraud by some government departments, including the Treasury.

How does it affect me? 

If you are self-employed and are concerned that this legislation may affect you, then find out more about IR35 by Clicking Here to access the latest information from Gov.uk. Alternatively you can Contact Us and we will direct you to one of our expert advisors.