Also known as "off payroll working rules", this tax legislation was introduced in 2000 to reduce tax avoidance by freelance contractors who supply their services to End Clients through a Limited Company, but for all intense and purposes would be classed as an employee if the Limited Company (an intermediary) was not used. 

Often operating through a Limited Company results in receiving a higher take home pay and different rules apply when it comes to paying taxes. The Government introduced the legislation to try and ensure contractors were paying similar amounts of Income Tax and National Insurance to that of their "employed" counterparts.

Since the legislation came into force it has always been the responsibility of the contractor to assess their working relationship with the Client therefore deciding whether they are "inside" or "outside" of scope.

Having not got the result they were expecting, HMRC decided to update the legislation in April 2017 and targeted the Public Sector by shifting this responsibility of assessment and determination from the contractor to the End Client.

The End Client now had to work out if their contract workers were classified as employees or not through assessment thus determining whether they were operating "inside" or "outside" of IR35. Now  having to make allowances for deducting the relevant Tax and NI contributions, this became the liability and consequence.

For more information on how you might be affected, please click one of the links below or get in touch, we'd love to talk to you.

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