The IR 35 rules are relatively new and a surprising number of freelance contractors still find them hard to understand. This is not surprising when you consider how much conflicting advice there is out there.
The best way to improve your understanding of the IR 35 rules and how they may affect you is to do a little reading online. Begin by visiting the HMRC website and reading the advice there. Next read the Wikipedia article on the subject. Then do an online search and have a look at what a few accountancy websites and self-employed or freelancer forums have to say on the matter.
What IR35 Means For Contractors
The IR35 rules were basically put in place to prevent the practice of employees being permanently employed, but only paying tax and National Insurance as if they were self-employed. It also ensures that employers offer people the proper terms and conditions that they are entitled to and pay the tax they should be paying. If an employee is employed on a permanent basis by a company they have rights to holiday pay, sickness pay and the employer must pay the taxman the right level of tax.
Prior to the IR 35 rules being put together it was not uncommon for a person to be doing a job one week, stating that they were leaving, only to return the very next week to do exactly the same job. The only difference being that they were paying taxes as if they were self-employed and their employer paid not tax or NI for them.
Unfortunately, genuine contractors got caught in the middle of these rules. If they are not careful when they work for a firm on a fairly regular basis it can appear to the taxman that they are in fact full-time employees of that firm. This can lead the taxman to believe that they are trying to dodge paying the correct level of tax. This is why it is vital that contractors and freelancers get sound advice about the IR 35 rules from a properly qualified and experienced IR35 savvy accountant.
Beever and Struthers have been providing accountancy services to the self employed for over 100 years. They have a full grasp of IR35and how to ensure contractors get the best possible tax deal.