What is IR35?
A worker is involved in off-payroll working when they work for a client through their own intermediary, often a personal service company (PSC), but would be an employee if they were providing their services directly – Source (gov.uk).
In laymans terms, you will be assessed through a set of rules called IR35 if you work on an assignment for a company or client through your own limited company. Essentially it looks at whether or not you are really self-employed and offering your services on a contract basis or whether you are hiding behind a limited company to make yourself more tax efficient than if you were an actual employee under normal PAYE rules
Supervision, Direction and Control (SDC)
Broadly speaking, these three criteria can be used as a quick assessment in determining whether or not you are truly self-employed. If you are under the supervision, direction and control of the client you are working for then it is highly likely you will fall under the umbrella of IR35. But why is this relevant to you? It has an impact on how you are treated for tax purposes and ultimately how to treat the income and expenses you generate.
Per the HMRC website, the existence in an arrangement of a right to supervise, direct or control a worker can affect whether the:
- agency legislation applies ESM2029
- employment intermediaries’ travel expense provisions apply to workers engaged through certain employment intermediaries
Neither legislation applies if it can be shown that the manner in which the worker personally provides the services is not subject to (or to the right of) SDC by any person. This is referred to in this guidance as the ‘SDC test’. Any person includes, but is not limited to the client to whom the worker provides the services to, the agency, project managers, consultants, site managers, etc.
What Next?
There are many other criteria to consider whether you fall under IR35 rules such as the agency legislation, number of intermediaries involved, the form of contract, the form of work etc. We advise it’s better to act now rather than ignore as you may be hit with an unexpected financial burden many years later!
Disclaimer – the above does not constitute advice nor must it be relied upon. You must seek full and proper advice that is applicable to your individual circumstances and correct at the time of your enquiry. Rules are always subject to change so you must never assume the information stated is the latest/most up to date.