IR 35

IR35 legislation was introduced to counter perceived tax avoidance which initally targeted contractors in the IT industry. However now it applies to everyone who operates his own service company.

IR35 is intended to stop contractors from working via their own service limited company and setting up compensation structure where they pay less tax and NIC than normal employees who are performing almost indentical tasks for the end client

It is important to remember each contract is considered by HM Revenue & Customs in isolation and as such the wording and terms of the arrangement is an important factor in their decision to apply IR35 to the income received from the service company.

It is not always obvious whether a service company will be caught by the IR35 and professional help should be sought to avoid significant problems later.