If you’re contracting through your own Limited company, it’s important to understand IR35 and how it affects your contracting business. Your recruitment agency and/or end client should discuss it with you, as they will have responsibilities under the legislation. In this guide, we’ll cover the basics that contractors need to know.
IR35, otherwise known as the Intermediaries Legislation or the Off Payroll Rules, concerns your employment status for tax purposes. It’s designed to prevent so called “disguised employees” from receiving a tax advantage by operating through a Limited company, also called a Personal Service Company (PSC).
You’re “caught by” or “inside” IR35 if your relationship with your end client resembles employment more than a genuine business to business arrangement. Those who are inside IR35 have to pay broadly the same amount of tax and National Insurance as they would if they were directly employed.