So do you need to even be thinking about IR35? HMRC have devised certain requirements that dictate if you really meet there definition of ‘self-employment’ or not. Have a quick look at the questions below to assess if you do.
- Does your contract stipulate terms such as days of work, start and finish times etc.?
- Do your services carry any financial risk if anything goes wrong?
- Are you free from any financial risk as a result of an adverse event?
- Do you have to accept and perform all work given by the client?
- Are you provided with equipment by the client?
- Do you have the same notice period length as other employees of the client you work for?
- Does your client own the equipment that you use?
- Are you entitled to any benefits which are offered to other employees of the client you work for?
- You have to provide the services yourself and you’re not able to send a substitute?
If you’ve answered yes to majority of these questions then most likely you wouldn’t be defined as ‘self-employed’ and IR35 could impact you, and how much you’re taxable for. It could even mean you having to be taxed at a higher rate. The example calculations below demonstrate how it works.
Notes:
- The tax rates and allowances used are for the year 2016/17.
- The amount of tax and NIC are illustration purpose only and must not be used for any other purpose.
As you can see the impact of IR35 on your income could be substantial. So what do you do now? Whatever you do, don’t do nothing. IR35 is law, and the financial implications and possible penalties are just not worth it. Interested in knowing how to make the best of your position if you’re affected by this? Have a look here for more details, or give us a call on 02084 446 6112 or just drop our resident tax expert a line at pratik.jani@tenforwardfinance.co.uk
