The IR35 or Intermediaries Legislation was first introduced in April 2000 with the aim to address tax avoidance by individuals working in the role of an employee through an intermediary, such as a limited company. Working in this capacity is sometimes referred to as a "disguised employee" and enables individuals to avoid tax and national insurance contributions which HMRC intend to recover.
HMRC may choose to carry out an enquiry on anyone they suspect to be "caught" by the legislation. Following this process, HMRC will calculate the individual's total income for the period in question as salary and attempt to recoup the applicable tax and national insurance contributions previously paid as dividends.
Understanding whether an individual falls under IR35 is complex and can have significant consequences should HMRC determine that tax is owed. To protect themselves from being forced to pay back thousands of pounds, workers should consult specialist experts and consider taking out IR35 insurance.
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Qdos Contractor have been defending contractors against IR35 since the legislation was introduced. The legislation is based on historic case law, so each significant case can determine how it is assessed. For the best part of IR35's life however, there have been three key tests, namely; the right to provide a substitute worker in order to fulfil the contract, control over how the contract is delivered, and the lack of existence of a mutuality of obligations between the parties (however this third test, often shortened to MOO, has been misinterpreted on numerous occasions).
With these three tests (plus a plethora of other supporting tests such as financial risk) Qdos, HMRC, and the courts determine the IR35 status of a contractor operating as a limited company. The responsibility for determining IR35 lays at the feet of the contractor themselves, and failure to assess appropriately and pay the relevant taxes, can lead to a lengthy investigation and eventual payment of liabilities, interest, and potential penalties.
The IR35 Advice Centre has been designed in order to keep you up to date with the latest news, provide you with a wealth of resources and guidance to help you remain compliant with the legislation, whether that is inside or outside of the IR35 rules, however we always recommend that you seek expert help for reviewing your contracts and tackling an enquiry. Get in touch with our consultancy team today on 0116 269 0992 for more information.