What does inside IR35 mean?<\/h2>\n\n\n\n
Being inside IR35<\/strong> is when a contractor has to pay income tax<\/a> and National Insurance Contributions<\/a>, just like employees do.<\/p>\n\n\n\n HMRC introduced the off-payroll working rules (IR35) in 2000 to make sure that contractors who would be employees if there was no intermediary pay broadly the same tax as employees.<\/p>\n<\/div>\n<\/div>\n<\/div>\n\n\n\n If a contract is outside IR35<\/strong> it means HMRC sees you as ‘genuinely’ self-employed and you\u2019re able to pay yourself in a tax-efficient way.<\/p>\n\n\n\n This could involve working on defined projects (rather than rolling contracts), actively marketing your business\u2019s services, and working for more than one client.<\/p>\n\n\n\n To be outside IR35, your contract must reflect you and your client’s actual working practices, so you aren\u2019t caught out by HMRC.<\/p>\n\n\n\n Your contract is likely to include details of the services you\u2019ll be providing, and when and where you\u2019ll be working. But it won\u2019t include demands from the client\u2019s point of view, such as performance monitoring and appraisals.<\/p>\n\n\n\n If you offer services, rather than a contract for a service, then you’re likely to fall outside of IR35 as you could send someone to do the work in your place, for example.<\/p>\n\n\n\n The rules are different depending on whether your client is in the public or private sector.<\/p>\n\n\n\n Public sector contractors<\/strong> \u2013 your end client is responsible for determining your IR35 status. That means they\u2019ll use HMRC\u2019s Check Employment Status for Tax tool (CEST), or an independent service, to work it out<\/p>\n\n\n\n Private sector contractors<\/strong> \u2013 medium-sized and larger clients are responsible for determining your IR35 status (it’s no longer your responsibility as the contractor). Since April 2021, the end-client, or the agency or third party who pays you, has been responsible for deducting your tax and National Insurance contributions (smaller clients are exempt from the change)<\/p>\n\n\n\n A small end-client (who won\u2019t work out your IR35 status on your behalf) will fall under two or more of these requirements:<\/p>\n\n\n\n If your end-client is working out your status from April 2021, it needs to give you and the relevant parties (like recruiters) a Status Determination Statement (SDS)<\/strong>, which explains whether IR35 applies to the contract.<\/p>\n\n\n\n End-clients need to show they’ve taken ‘reasonable care’ when working out your employment status \u2013 otherwise they could be responsible for getting things wrong.<\/p>\n\n\n\n It also needs to have a disagreement process<\/strong> you can use, to object to the decision. Your client needs to respond to your objection within 45 days, saying why it came to the decision, or updating its reasoning based on your objections. If it\u2019s updating its decision, the client will need to change the SDS and give it to the relevant parties.<\/p>\n\n\n\n Read more: <\/strong>HMRC updates CEST tool to help self-employed check tax status<\/a><\/p>\n\n\n\n <\/p>\n<\/div>\n<\/div>\n\n\n\n If you\u2019re looking for an inside IR35 calculator, HMRC\u2019s CEST<\/a> tool is one way to work out whether a contract falls inside IR35 or outside IR35.<\/p>\n\n\n\n To use the tool, HMRC says you need:<\/p>\n\n\n\nWhat does outside IR35 mean?<\/h2>\n\n\n\n
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<\/figure>\n<\/div>\n<\/div>\n\n\n\nInside vs outside IR35: who works it out?<\/strong><\/h2>\n\n\n\n
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IR35 assessment: how do I know whether I\u2019m inside IR35?<\/h2>\n\n\n\n
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