Contractors and freelancers often operate through a private company to enjoy a better tax treatment when compared with sole traders. However, a more favourable tax position is actually never guaranteed due to off-payroll working rules known as IR35.
According to IR35, if a contractor or freelancer has a working relationship with a client that is more akin to regular employment, that worker has to pay Income Tax and National Insurance contributions on their income, rather than the more generous Corporation Tax.
This is called “deemed employment”, and working out whether you or your contractor are deemed employees can be difficult.
Whether you’re a contractor yourself or hiring someone to carry out work for you, making mistakes can lead to time-consuming tax investigations and costly penalties.
To help, we’ve put together a guide to IR35, covering what can go wrong and how to ensure you’re getting it right.
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If you are a contractor or are hiring someone, we can provide you with help and advice on IR35, please contact us.
