Everything You Need to Know About IR35 (Guides)

June 15th, 2023

This guide aims to provide you with a comprehensive understanding of IR35, helping you easily navigate the UK's business landscape

As you set your sights on UK expansion, understanding the intricacies of local tax laws becomes crucial. One legislation you’ll encounter is IR35. This guide aims to provide you with a comprehensive understanding of this law, helping you easily navigate the UK’s business landscape.

But first, let’s take a quick look at what exactly IR35 entails:

What Is IR35?

Introduced in 2000, IR35, initially known as the “Intermediaries Legislation”, is a UK tax legislation aimed at identifying ‘disguised employees’ and ensuring they pay the correct amount of tax. Essentially, these are contractors who work through an intermediary, like a Personal Service Company (PSC), but would be classed as an employee if the intermediary was absent.

The purpose of IR35 is to level the playing field between regular employees and individuals who use a PSC to contract their services and who may be taking advantage of this arrangement’s tax benefits while working similarly to full-time employees.

“Inside” or “outside” IR35?

A key aspect of IR35 is the classification of contracts as either ‘inside’ or ‘outside’ IR35. If a contract falls inside IR35, the contractor is considered an employee for tax purposes and must pay income tax and National Insurance Contributions as such. If a contract is outside IR35, the contractor can draw income from their company in the form of dividends, a more tax-efficient method.

As a business, it’s vital to correctly assess the IR35 status of any contract with a PSC. Failure to do so can lead to significant financial and legal consequences. Reviewing your practices with contractors and making changes to ensure compliance may be necessary. Consider consulting with a legal or tax advisor who specialises in IR35 issues for guidance. Or better yet, consider working with a Global PEO to handle your employment needs when expanding into the UK.

Navigating IR35 can be complex, but with the right understanding and guidance, you can ensure your business remains compliant while expanding into the UK. To understand how IR35 could impact your business expansion plans, have a look at our comprehensive articles:

More IR35 Related Articles

IR35 Changes: Risk and Responsibility in the Private Sector

This enlightening blog post delves into the transformative changes in the UK’s Inland Revenue 35 (IR35) laws, underscoring the pivotal shift in responsibility for determining a worker’s status and the associated tax intricacies. It emphasises the imperative need for rigorous due diligence by clients and the lurking perils of inaccurate categorisation.

Learn about the responsibilities of private companies towards IR35 here

Changes to Off-Payroll Working (IR35) Rules

Dive into the crucial IR35 off-payroll rules and confidently navigate their business impact to see if it affects your expansionary plans. Uncover the latest updates, payroll changes, and guidance to ensure compliance.

Find out what changes have been made to the IR35 rules here

COVID-19 Emergency Postpones Tax Reforms

Explore the recent changes in the UK’s IR35 tax laws that aim to distinguish independent contractors from full-time employees. Learn how this shift in responsibility affects private sector businesses and impacts tax contributions, particularly in light of the COVID-19 pandemic’s influence on its implementation.

Discover how COVID-19 impacted IR35 legislation here

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Gemma Bignell

Gemma joined The Briars Group in 2006 as an Accountant and now is a proud Board member and Chief Financial Officer for our company. Gemma has an extensive knowledge of international operations and is involved in the overall operation of the business providing technical expertise and guidance as one of our key advisors to clients looking to expand into new territories. In her spare time Gemma keeps herself busy with her keen interest in DIY, keeping fit and looking after her pets! Gemma is passionate about her community and has spent time as a Scout Leader which is a testament to her dedication to supporting our young leaders of the future.