Essentially, IR35 affects all contractors who do not meet HMRC’s definition of ‘self employment’.
The IR35 rules will result in an increased tax and N.I. liability and will prevent contractor companies from retaining profits to grow their business in the future.
Those contractors who fall under the IR35 rules will be liable to Schedule E taxation and National Insurance (N.I.), following deductions for expenses. Income will be in the form of a ‘deemed payment’, following these deductions. Contractor Companies may have a mixture of IR35 and non-IR35 turnover, in which case income and reward associated with unregulated contracts will escape these rules.
Normal Section 198 expenses may still be claimed. In addition, there is a provision for other intermediary expenses of 5% of a contractor’s turnover.
At Account & Finance we understand all the financial needs of contractors and IR35 and our experienced team of accounts is all set and ready to help you deal with it. With our help you can easily fulfill your tax obligation and take good care of your finances.
These are the following expenses that we can claim for you in addition to the 5% allowance:
- Pension payments – either personal or executive schemes
- Business travel – incurred in the course of business duties
- Subsistence – accommodation, meals when away from home
- Professional Indemnity cover
- Benefits in kind – e.g. private medical insurance
It is clearly in all contractors’ interests to be viewed as ‘self employed’, or at least for part of your income to be IR35-free. If you are able to diversify your business interests, or change your working practices in order to satisfy more of the pointers to ‘self employment’, your position will be strengthened. We will offer you solid advice on how to proceed and find ways to deal with the IR35 rule.