HM Revenue & Customs (HMRC) previously published guidelines on the business entity tests that they hoped would help determine whether the intermediary’s legislation will apply. HMRC want to be satisfied that with a review of various factors you might caught by IR35.
What is IR35?
IR35 was introduced in April 2000 and was designed to stop contractors working as disguised permanent employees i.e. benefiting from the tax advantages of being a contactor without accepting the increased responsibilities of company ownership or employment.
The factors that HMRC consider are based around how you operate and deal with the following issues:
- Business Premises
- Personal Indemnity insurance
- Previous PAYE
- Business plan
- Repair at own expense
- Client risk
- Right of substitution
- Actual substitution
Whilst these factors are not statutory and HMRC emphasise that their use is voluntary it goes without saying that these factors do help calculate the risks as to whether IR35 rules exist.
One thing commonly forgotten is that each assignment needs to be looked at as some assignments may be outside of the remit of IR35 and others are caught. A company operating in this area must have a watertight contract for services and what is written in that contract must represent what is actually done.
IR35 taxation is a mine field and once again it looks as though the cash strapped government are having a go!!!
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