The ‘IR35’ rules are intended to prevent the avoidance of tax and National Insurance Contributions (NICs) through the use of personal service companies and partnerships. The rules do not stop taxpayers supplying their services through their own company or a partnership. However, they do seekto prevent people who use intermediaries from being better off than they would have been if their end clients had employed them directly. The IR35 shorthand reference to these rules dates back to when they were first introduced by the 35th IR press release of the Chancellor’s Budget in 2000. The IR35 rules can apply in any business sector.
HMRC guidance on the subject is intended to help contractors self-assess their possible liability to the IR35 rules. HMRC use a risk based approach to checking compliance with the rules and assess taxpayers as low, medium or high risk. However, a high risk taxpayer is not automatically outside the IR35 and likewise nor is a low risk taxpayer automatically within the rules.
HMRC’s IR35 FAQs document has recently been replaced with updated guidance. The guidance is divided into the following main sections:
- IR35 Intermediaries Legislation
- How to work out if IR35 affects you
- How IR35 applies to you
- IR35 deemed employment payment: how to calculate and pay
- IR35: contracts
- IR35: enquiries by HM Revenue and Customs