If you work on projects for larger businesses through your own personal service company (PSC), you may pay less tax and NIC than would be paid overall if you were an employee of those businesses.
The IR35 tax avoidance rules came into effect in April 2000, to prevent individuals from playing the system and paying less tax by working through their own PSC, when in reality they should be taxed as employees.
Recently there has been a rash of IR35 cases heard at the tax tribunals. HMRC won one concerning a TV presenter, but in three other cases the taxpayers were successful.
Retain evidence to avoid issues with IR35
If you provide services through your own PSC, and don’t want to pay more tax than you have to, make sure you retain evidence of your working arrangements to support as many of these points as possible:
- You can refuse to accept the contract and terminate it on your terms
- Your customer is under no obligation to provide you with work
- You have the right to send a substitute to work in your place
- You can hire others to help you with the task
- You have control over how, where or when you perform the tasks
- You are treated differently from your customer’s employees
- You provide at least some of your own equipment
- You take on financial risk, by (say) having to correct work in your own time
- You can work for other customers concurrently
- You and your customer do not intend to form an employer-employee relationship.
There are proposed changes to the 1R35 rules from April 2019, which may make it more difficult to prove you are an independent contractor. Contracts for public sector bodies are already subject to different rules.
Would you like help and advice on this or any other issue?
Contact us straight away by telephoning 01932 564098 or email us using our ‘Contact Us’ page.
This note was published from our Summer 2018 Newsletter dated June 2018. Please be aware that the information above may have changed in subsequent months.
This note is written for the general interest of our clients and is not a substitute for consulting the relevant legislation or for taking professional advice.