IR35 is a notoriously complex piece of legislation. Getting to know some of the frequently used industry terms is a vital first step. With a handy glossary saved into your bookmarks you will be one step closer to coming to terms with IR35 and what it means.
If you are unsure of any other key phrases feel free to drop us an email at [email protected] and a member of our expert team will get in touch to help you.
After all, IR35 is already complicated enough. Let’s keep it simple where we can.
Arguable point – A reasoning which may cause an exception to the general rule, usually when discussing status tests.
Blanket determinations – The method of applying a single IR35 determination to a large group of engagements without having undertaken adequate assessment.
Case law – Previous cases that set a precedent in law and legislation and impact the outcome of modern cases.
Confirmation of arrangements - A document written to confirm the true nature of the working relationship between a worker and their end client. A CoA sets out the day-to-day practices (working practices) undertaken by a worker.
Contractual chain – The group of entities involved in the supply of a worker to an engager. Also referred to as a supply chain.
Deemed salary – Income paid to a contractor from their limited company relative to the 'would be' received income of an employed worker fulfilling the same role.
Disguised employee –A contractor fulfilling the role of an employee whilst being classified as self-employed for tax purposes using their limited company. In other words, working inside IR35.
Dividends – Income paid from the company's profits.
Employment language – Terms which are generally used when discussing permanent employment e.g. overtime, line manager.
End client/engager – The company/organisation that the contract is ultimately fulfilled for.
Fee-payer – The party in the contractual chain that is responsible for making direct payment to the limited company providing the services. In typical contractual chains the fee-payer is often a recruitment agency.
HMRC – Her Majesty’s Revenue & Customs. The UK's tax, payments, and customs authority.
Indemnity – Level of insurance cover.
Inside IR35 – A term to describe an engagement that is more akin to employment than self-employment.
Intermediaries legislation – Otherwise known as IR35, it is a piece of tax legislation introduced to combat the perceived tax avoidance of limited company contractors fulfilling the role of an employee whilst classifying themselves as self-employed for tax purposes.
Intermediary – A business entity which exists as a facilitator or means of operation between the worker and engager. In the context of IR35, this is usually used to refer to the limited company, however, can also be used to describe an umbrella company or recruitment agency.
IR35 – The common term used for the Intermediaries’ Legislation. Also, the reference number for the press release issued by the then Inland Revenue (HMRC) which announced the legislation.
Liabilities – Liabilities are an amount of money owed that requires settling. More specifically related to IR35, liabilities are the amount of backdated tax due if an engagement is found to be inside IR35 after the fact.
Limited company –A type of private business where the company owners' debt responsibility is limited solely to the amount invested.
Limited company contractor –A type of self-employment where the worker is usually both the director and the principle fee-earner of a private business where the company owners' debt responsibility is restricted solely to the amount invested. The business provides services on a temporary contract basis.
Lower-level contract – The contractual agreement between the recruitment agency and the limited company providing the services.
Mutuality of Obligation – An IR35 status test. Often referred to as MoO, it refers to the fact that there should be no expectation for an engager to continue offering work once the original contract has ended and there should be no expectation for the worker to continue accepting any work offered.
Outside IR35 – An engagement that reflects genuine self-employment.
Private sector – A collective term for all privately owned businesses.
Public sector –A collective term for all Government departments and Government-operated businesses.
Recruitment agency – A third party organisation that facilitates the matching of workers to engagers/hirers for advertised job roles.
Retrospective investigation – Refers to an investigation into previous tax years.
Status tests – A set of criteria established through case law that are used to determine the IR35 status of an engagement i.e. whether that engagement falls inside or outside of IR35.
See our IR35 Compliance Guide for explanations of the individual status tests.
Substitute – An alternative, equally skilled, worker who can be engaged to undertake the operation of a contract in the stead of the original contractor if required.
Umbrella company – A type of intermediary which acts as an employer for contract workers in exchange for a fee. The umbrella company takes responsibility for timesheets, holiday, and sick pay for the worker, whilst the worker maintains the flexibility of contract work.
Upper level contract – The contractual agreement between the recruitment agency and the end client.
Working practices – The manner in which a worker provides the services. Often acknowledged to reflect the true nature of an engagement.
Just beginning to learn about IR35? Why not take a look at our collection of IR35 Resources, ranging from beginner to expert, including a selection of free to download guides and templates.
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