IR35

What is IR35?

IR35 is the reference number that was given to an HM Revenue & Customs (HMRC, formerly Inland Revenue) budget day press release (9th March 1999) which first announced the intention of the Government to introduce new rules and regulations that would effect those who provide services via an intermediary.

What is the Impact on the Individual?

Anyone caught by the rules and regulations will have to perform a calculation for each tax year in which IR35 was deemed to apply.

If that calculation shows that there is a deemed payment due, Schedule E tax and NIC will be applied to that ‘deemed payment’.

What is the Impact on the Agency?

Quite often a recruitment agency will be involved in the chain between the individual and the client/end user of his/her services in addition to the PAYE umbrella company.

Legislation is drafted in such a way that it is unlikely that the recruitment agency would meet the conditions relating to an intermediary. Therefore the agency is likely to have no liability for tax and NICs.

Who is caught by IR35?

Anyone supplying services to clients through an intermediary could be caught by IR35.

IR35 applies to engagements where a worker provides services under a contract between a client and an intermediary; and not withstanding the presence of the intermediary, the income would have been Schedule E income of the individual performing the services.

IR35 is aimed at catching those workers who HMRC believe are effectively employees if it was not for the wrapper of incorporation provided by the intermediary.

Who is exempt of IR35?

The rules will not apply where the worker only receives income from an intermediary in a form which already falls within Schedule E and Class 1 NIC. This is the category in which you would fall into, should you join goumbrella.