What is IR35 and how does it affect my UK limited company?

Introduction: What is IR35?

Introduction: what is IR35 and how does it affect my UK limited company?

IR35 is a piece of UK tax legislation that was introduced in 2000 to tackle what the government saw as the misuse of personal service companies by employees to reduce their tax liabilities. The legislation was aimed at so-called 'contractors' who worked through their own company rather than as employees. The rules were tightened up in 2005 and again in 2013 and they continue to be constantly reviewed and tweaked by an ever zealous UK Government and HMRC.

IR35 was introduced in order to reduce the amount of tax avoidance taking place within the UK's public sector. It does this by ensuring that individuals who work for a company through an intermediary (such as a personal service company) are paid in the same way as those who work directly for the company. This means that the company can no longer avoid paying employee National Insurance Contributions (NICs) and income tax on their wages by using a personal service company. a source of debate and confusion for both contractors and clients.

Why Was IR35 Introduced ?

IR35 was introduced in the UK in April 2000 as an attempt to clamp down on the use of disguised employment contracts. The legislation was intended to ensure that workers who were employed via personal service companies were treated in the same way as employees for tax purposes. In other words, the legislation was designed to prevent people from using personal service companies as a way of avoiding paying income tax and National Insurance contributions by offpayroll working.

How does IR35 work?

IR35 is a UK tax law that was introduced in 2000. It is designed to prevent workers from being taxed as employees when they are actually self-employed. The law applies to people who work through their own company and provides for a set of rules that determine whether the worker is an employee or self-employed. If the worker is deemed to be an employee, then they will be taxed as an employee and not able to enjoy the benefits of self-employment.

What is the impact of IR35 on UK Personal Service Companies?

The IR35 legislation was introduced in the UK in 2000 to tackle tax avoidance by contractors working through personal service companies (PSCs). The legislation affects individuals who provide their services to clients through a PSC, and who would otherwise be employees of the client if they were providing those services directly. The goal of the IR35 legislation is to ensure that these individuals pay the same amount of tax and National Insurance Contributions (NICs) as employees would pay, regardless of how they are paid.

There has been a great deal of debate over the years about whether or not IR35 achieves its desired outcome, with many people arguing that it has had a negative impact on businesses and individual contractors alike.

Are you facing IR35 issues with your Personal Service Company?

Thinking of trying to dissolve your PSC?

If you are facing issues due to debts created by using a Personal Service Company and you have IR35 issues with HMRC you can still sell you UK limited company to a new owner and walk away from the debts and liabilities.