What is IR35 and how does it effect me?
IR35 is a piece of Tax legislation originally announced in 1999, which took effect from April 2000, that effectively seeks to tax contractors, freelancers, consultants and other types of singular trading arrangements, as if the individuals were employed by the end client themselves. Historically, small single person companies were set up and used to reduce the amount of taxation paid through using dividend payments. HMRC viewed this as disguised employment and a way to avoid paying Tax. IR35 was a response to that and over nine years later is still striking fear into the hearts of freelancers! There have been many arguments that small companies should be allowed to trade as if outside of IR35 and thus able to still make tax efficient dividend payments. Today, unlike Crystal, some umbrella schemes still use dividend payment systems and offer IR35 insurance or IR35 friendly contracts. But – and its a big but – contractors in these schemes are still at risk of having to pay back underpaid
