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Office Hours: 9am to 5.30pm

What Expenses Can You Claim When Inside IR35?

It is understandable that many contractors remain concerned about how being inside or outside IR35 will affect them. Whether you are inside or outside can alter your tax contributions and take-home pay. Therefore, both client and contractors need to have a firm understanding of their working relationship to ensure it remains fair.

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Inside and Outside IR35 – What You Need To Know

IR35 was introduced by HM Revenue and Customs (HMRC), established to combat tax avoidance in the provision of personal services. Following this, the definition of self-employment was outlined. This way, disguised employees couldn’t take advantage of the tax benefits of self-employment. However, those who falsely identify as self-employed also enjoy the security of being a permanent employee.

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Sole traders and IR35

If you are a sole trader working as a contractor for a company, it’s vitally important to be aware of the rules surrounding IR35. IR35 was first introduced by HMRC around the turn of the millennium and was designed to clamp down on tax avoidance.

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A Complete Guide to the IR35 Legislation

The ambiguous nature of IR35 makes it easy for ill-informed and underprepared contractors working as limited companies to face charges from HMRC for non-compliance.

Whilst the rules regarding IR35 lack clarity, there are several status tests that can be applied to the relationship between a client and contractor to gain a fair idea about whether the contractor should fall inside or outside of IR35.

Currently, it is the responsibility of the private sector contractor to deem whether they fall inside or outside, but in the public sector the responsibility now lies with the hirer.  HMRC are expected to extend the public sector IR35 rules to the private sector soon, so it is in the best interest of both hirers and contractors to have a thorough understanding of how the legislation works and what they must do to comply.

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IR35 cost

If you are outside IR35, you would typically take a small salary from your company which will allow you to benefit from statutory payments whilst minimising the amount of Employer’s and Employee’s National insurance and tax. The rest of the income you take from the company would be paid in the form of dividends which come out of the company’s post-tax profits.

The advantage of this is that dividends do not attract National Insurance and are taxed under the Corporation Tax regime.

If however you are caught by IR35 on an engagement then the majority of your income would be treated as “deemed salary” and subject to the same levels of taxation as a normal employee. There may still be some benefits of working via a limited company even if IR35 caught such as flat rate VAT and certain expense allowances but the financial advantages are less.

You can find more IR35 information here

Transport for London effectively bans ltd company contractors

Changes to IR35 legislation being introduced in April have led at least one public sector employer to force Limited Company contractors to go Umbrella or face being jobless.

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How 2017 will stack up for contractors

2016 was an eventful year for the UK economy and for contracting with several legislative changes and political and economic events such as the Brexit vote. These events are likely going to affect contractors, freelancers and the self-employed in both public and private sectors during 2017.

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Autumn Statement 2016 Preview

On Wednesday this week we will see our new chancellor, Philip Hammond, deliver his first Autumn Statement to the Commons. This will be the first non Osborne statement since 2009 so will it signal a new approach?

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The IR35 proposed changes: the mass walkouts of freelancers

With the Autumn Statement nearly upon us, many of us in the financial and recruitment sectors are considering what impact the proposed changes to the treatment of “off payroll” workers in the public sector may have on UK PLC.

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