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Find Your Feet with IR35

Vetro has teamed up with Workr to show you how

The IR35 private sector reform is already proving a challenge for contractors. That’s why we’re working with industry experts Workr to help keep you protected and maximise your income.

What is IR35?

IR35 is a set of legislation within the Finance Act that’s designed to prevent tax avoidance. It applies if a freelancer provides their service through their own limited company or personal service company.

It was introduced because…

  • Limited company owners don’t have to pay National Insurance Contributions (NICs) on company dividends.

  • You could invoice the client, pay yourself a minimal ‘salary’, and take the rest as ‘dividends’.

  • Your clients are able to limit or reduce tax payments and NIC's as a result of working with limited company owners.

So why is it being reformed?

Despite IR35 being first introduced in 2000, the government still felt that too many limited company owners were operating outside the rules. So, in April 2017, the public sector was required to adopt new rules, with the private sector expected to follow in April 2021. These new rules mean that…

The end client (or the ‘engager’) now determines if your contract and working practices are inside or outside IR35.

Your agency will be the second to review your employment status.

If either deems you inside, the fee payer (either the end client or agency) will be responsible for deducting PAYE tax and NICs from your earnings.

If you deem the ruling to be unfair, you will have to appeal to HMRC.

What about the public sector?

Public authorities now determine the status of each project, assignment, and/or role. They issue a ‘Status Determination Statement’ to the recruitment agency to either agree or disagree with the status and then forward it on to the contractor or freelancer to do the same.

Until an agreed status determination is issued, no gross payment can be made to the contractor’s personal service company – any payment made will be non-compliant.