The Practical Guide to Limited Company Tax
If you have chosen to operate your business as a limited com...
By Chris Martins D'Almeida on 15th March 2016
Understanding IR35 and its potential impact on you is vital for anyone that’s likely to be operating through their own Limited Company.
This legislation was put in place by HMRC to establish the true nature of contractor employment and whether it is a genuine business to business relationship or one of “disguised employment”.
Operating in this way enables the individual (in the eyes of HMRC) to falsely make substantial tax and National Insurance (NI) savings. You need to assess each contract to decide if it is caught by IR35 or if it is outside IR35 to know how you can take income from it.
If you are found outside IR35, it will be important for you to be able to show that your operations in the work you complete for your client are different from that of their full-time employees, both contractually and in practice.
If a contract is caught by IR35, you’ll need to pay a lot more tax and National Insurance to HMRC. Here’s the main impact on you:
Remember, if you are investigated by HMRC, each case is unique and with a decision based on its own merits.
If you’re concerned about whether your contract is inside or outside IR35, here’s some pointers to help ensure you’re not counted as a “disguised employee”:
If, however, you remain concerned about your existing practice, it’s best to get professional advice to make sure your contract and procedures are in the right place.
For more information on IR35, check out our comprehensive guide.
We offer a high-level review of your contract as part of our contractor accounting service. We can also refer you to other IR35 specialists if the need arises.
Our handy guide to claiming expenses through your limited company looks at what you can and can’t claim tax relief on through your company
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