What Is IR35?

IR35 is the industry name given to laws set out in the Finance Act 2000.
The legislation is intended to prevent individuals from avoiding tax by ‘disguised employment’ – working as self-employed contractors through their own Limited Company even though they do the same job as an employee.

If HMRC decides that your contract puts you within IR35, you’ll have to pay tax and National Insurance like an employee, rather than taking your director’s fee and dividends. So it’s important to make sure you’re entitled to every penny you take from your company.

For example, an IT technician might leave their permanent job on the Friday, only to return on the following Monday as a contractor, performing exactly the same job in the same was as they did before but working via a Limited Company intermediary.

If the relationship between the worker and the client would be classed as employment if there was no intermediary, the IR35 rules make sure that the worker pays similar income tax and National Insurance Contributions to conventional employees.

For more information, download our FREE guide to IR35 which includes details of the changes made to IR35 in the public sector.