We have covered at length the rules of IR35 and what you can do to protect yourself against the IR35 legislation. The impacts of the IR35 legislation can affect both your business and you personally and it is these effects that we will be exploring here.
As a contractor, your business is important to your career. Some of you may view yourself and your company as one and the same, or you may see your company as a business to progress and develop. However you treat your business, IR35 will ultimately have an impact on the both of you.
Having an investigation may affect your reputation with your client, which can be detrimental to both. No client wants HMRC knocking on their door asking about one of their contractors, and no contractor wants their employment status in the hands of their client’s HR department either. Investigations can be incredibly stressful for contractors as a lot of the legislation boils down to perception, which can in turn, put pressure on the business.
Your business will usually take upon the expense of any contract reviews or enquiry insurance, as well as business insurance which is an indication of being in business on your own account; one of the many IR35 tests. These are standard expenses which come with trying to protect you and your company against the legislation and will likely be made at the start of every new contract, or annually for insurance.
As a contractor, your personal finances are ultimately intertwined with your company’s, and so both are effected if you are operating inside IR35 and are having to pay a deemed salary. Even more so is if you are not paying a deemed salary and are eventually caught by the IR35 legislation. You will be charged for backdated tax and NI liabilities, penalties and interest for up to 6 years of accounts. This will effect both your personal finances and your company’s. It may even lead to the ultimate dissolution of your company.
It all sounds quite miserable, but if you pay your taxes correctly as per your IR35 status, you shouldn’t have a problem, even if HMRC do enquire into your accounts. Then you and your company can keep working for many years to come.
Ask away! One of our team will get back to you!