IR35 Intermediary Legislation
IR35 is a piece of tax legislation and was introduced by the government to combat “disguised employment”. IR35 focuses on individuals who were effectively employees but were gaining a distinct tax advantage, or tax avoidance, by creating a limited company by which they were being paid fees by their client which may have ordinarily been deemed remuneration by the employer.
There are clear and significant differences between an employee of a company and an individual in business who has “won” or “been awarded” a contract. As a contractor you would not be entitled to employee benefits, pension, private health, subsidised restaurant, social clubs etc. If you have your own business which is limited by nature, it is likely that you will have your own website and business cards. You may also advertise your business in trade or industry publications.
If you are a genuine contractor or freelancer you should have nothing to worry about. That is not to say that your status may not be subject to an HMRC IR35 tax investigation, however, some contractor specialist accountants offer an insurance policy where if you are subject to a tax investigation the insurance will provide cover for an “expert” to help defend your position and present your case. It is worth taking note whether the policy also covers any appeal process as some only cover the initial investigation process. Although the chances of being subject to an investigation is low it is worth bearing in mind under UK tax law you are guilty until you can prove your innocence.
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