IR35 & PERSONAL SERVICE COMPANIES

If IR35 applies, all payments to the intermediary are treated as your employment income and the intermediary must pay any tax and National Insurance due. It ensures that you pay roughly the same amount of tax and National Insurance as if you’d been directly employed by the client.

IR35 looks at the underlying relationship between you (the worker) and the client for each contract or engagement. The facts of each engagement determine whether IR35 applies and not any label, description or job title. You need to assess what that relationship would be (your employment status) if there were no intermediary involved. You and your intermediary must assess the underlying relationship between you and your client for each of your contracts.

Who is responsible for determining IR35 status now depends on the size and sector of your end client, following reforms introduced in 2017 (public sector) and 2021 (private sector):

• If your client is a public sector body, or a medium or large private sector business, the client is responsible for assessing your employment status and must issue you a Status Determination Statement (SDS) setting out their decision and reasoning.
• If your client is a small private sector business, responsibility falls to you and your intermediary — you must assess the underlying relationship for each contract yourself, under the original rules.

There can be significant consequences of ignoring IR35 legislation. Interest and penalties may be charged on any additional tax and National Insurance contributions due as a result of an HM Revenue and Customs (HMRC) enquiry into your situation. >>> HMRC Employment Status Tool <<<

Contractor Pages ► Contractors & Freelancers ■ IR35 & Personal Service Companies ■ IR35 Advice ■

■ IR35 Employment Status ■ Advantage of Separate Contracts for Each Project ■ IR35 Case Law ■

■ Engaging as Employee or Contractor ■ IR35 Status Review ■ Contractor Expenses Guide ■

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