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Contractor Accountants

 

​IR35 for Accountants

IR35 for Accountants
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Contact Qdos Contractor:0116 269 0999
 
 

Guidance for Contractor Accountants

 

Intermediaries Legislation (IR35) for Accountants

As an accountancy practice or individual accountant that services contractors, IR35, otherwise known as the intermediates legislation is an important element of helping a contractor to ensure they pay their taxes correctly. However, particularly for the general accountancy firm which doesn't specialise in contracting clients, IR35 can be a niche topic which requires experience and an understanding of employment case law to truly understand and assess.

We work with a number of accountancy practices to assist them with their IR35 needs, whether it is advice for their contractors, or outsourced contract reviews on the practice's behalf - enabling accountants to add the value of our 18 years' experience in dealing with IR35 enquiries to their service.

There has been recent reform to IR35 in the public sector, and potential reform to the wider private sector which will generate many queries from contractors. Now is the time for accountants to ensure they are up-to-speed with the intermediaries legislation and how it impacts their clients.

What is the IR35 legislation?

 

IR35 is the commonly used term for the ‘Intermediaries Legislation’ which was introduced in April 2000 via a press release numbered 'IR35' (Inland Revenue 35). IR35 targets those using personal service companies (PSCs), i.e. those who are offering their own services through their own limited company or partnership. They tend to be the sole employee of the business with the exception perhaps of an administrator which is often a close relation. The legislation looks to determine between a worker who is operating legitimately in this way, often a consultant who is an expert in their field or has a niche skill, and workers who are using their limited companies to obtain a tax advantage they would not otherwise have.

HMRC have four specialist IR35 teams dedicated to tackling 250 enquiries a year. These enquiries look at a contractor's engagement over a particular accounting period and will look to determine whether the individual is a genuine contractor or a 'deemed employee' who therefore owes tax and NI.

How does IR35 affect you as an accountant?

 

Contractors will need to determine their IR35 status at the start of an engagement. Many will seek this out on their own, such as purchasing directly with Qdos Contractor, whilst others will look to their accountant. Many accountants, particularly those who are not contractor specialists and even many who are, will not have sufficient experience in dealing with IR35 and assessing engagements to be able to provide the necessary level of service to their clients. Qdos can therefore offer outsourced solutions or referral schemes for accountants to provide this.

If a contractor is engaged 'inside IR35' (i.e. they are operating in a manner where they would be deemed as an employee for tax purposes), they will need to make a deemed payment. This is the payment which is made at the end of the tax year and accounts for the relevant tax and NI on any such engagement, taking into account expenses and corporation tax. You can find more detailed information on how to calculate the deemed payment here.

In addition to the deemed payment, if a contractor is 'inside IR35', they will be unable to claim any expenses concerning Travel and Subsistence for that engagement and so some consideration as to their expense claims will need to be made. You may find however, that contractors who have multiple contracts in the same accounting period may have a different IR35 status for each contract, and so the rules only apply to expenses which relate to the engagement which is 'inside IR35'.

In the event of an enquiry, regardless of the contractor's IR35 status, the contractor will be asked to provide copies of their contracts along with their accounts for a specified period, as well as evidence of their IR35 status. As their accountant, you will likely be their first port of call, particularly with regard to the accounts. It is worth checking however, if the client holds any tax/IR35 insurance, as they may need to approach their insurer before any contact is made with HMRC for their insurance to kick in.

​By having a general understanding and appreciation for the difficulties associated with the IR35 legislation, you can provide an improved service to your contractor clients. We have a wealth of IR35 guidance on the website if you would like to learn more. We also offer a range of training packages for accountants of varying size and expertise.

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The Company

 

About us

Why Qdos?

 

We are a UK leading specialist on the IR35 legislation, completing over 600 contract reviews each month and successfully handling over 1,500 status enquiries on behalf of contractors, saving them over £35million in tax. Our dedicated team of specialists are on-hand to provide advice over the phone, via online chat or email as part of our full-service offering, and partners and contractors alike are assigned an account manager to deliver a personal service, whether we speak with you once a week or once a year.

 

Our History

 

Qdos started out as a tax consultancy firm in 1988, set up by ex-Revenue inspectors, and focussed its expertise on contractor tax with the introduction of the IR35 legislation in 2000. Qdos has now become a leading provider of contractor compliance services in the UK, recognised for many awards including the Queen’s Award for Enterprise in Innovation, and featured in the London Stock Exchange’s ‘1000 Companies to Inspire Britain’.

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