Everything You Need to Know About IR35 (Guides)
June 15th, 2023
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
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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.
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.