What is IR35 and off-payroll working?
IR35 is a piece of UK tax legislation relating to off-payroll working.
The off-payroll working rules apply if a worker provides their services through an intermediary to close a loophole in the tax system. The intermediary will usually be the worker’s own personal service company (PSC) where the worker would pay less tax.
However, despite a contract being with a limited company, the reality is more like that of an employer-employee relationship, where the worker would be taxed as an employee. This is referred to as a deemed employee.
The IR35 legislation looks to identify the ‘deemed employees’ and ensure they are taxed correctly, however, IR35 can impact those operating genuinely through a limited company due to the subjective nature of the legislation.
The rules make sure that workers, who would have been an employee if they were providing their services directly to the client, pay broadly the same tax and National Insurance contributions (NICs) as employees. Where IR35 applies, it shifts the burden for collecting tax from the PSC to the client who engages the worker through their payroll.
We have created an IR35 guide in collaboration with McCabe and Co Solicitors which outlines everything you need to know about IR35 and off-payroll working.