The term "IR35" is a actually a misnomer as it refers to a press release from the UK Chancellor announced in the 1999 budget. The legislation it refers to is the Intermediaries Legislation which was introduced the following year in the budget of April 2000. As a result of this legislation, all contractors need to consider their compliance with 'IR35' legislation. We hope this article will help explain how it can potentially affect you and contractors in general and the benefits of having a website to demonstrate you are seeking new business and clients.
Effectively the legislation means that HMRC can levy tax against some contractors if they are found to be actually operating as an employee of their respective client. Any contractors or freelancer found to be 'within' IR35 can pay a significant amount of additional tax thereby reducing their potential remuneration plus the HMRC can also reclaim tax on previous earnings you made from the same client and this can be a very substantial amount.
Why was IR35 introduced by HMRC?
The intention of HMRC was essentially to counteract avoidance schemes being employed by contractors and freelancers which reduced PAYE tax and National Insurance (NIC) receipts generated for the UK Treasury. These avoidance schemes being used by contractors and freelancers were in the form of 'Intermediary' business formations. These 'Intermediaries' could take several forms but typically whereby contractors/freelancers set themselves up as Partnerships or as a Limited Company to obtain work either direct from an end client or via an agency.
The view taken by HMRC was that a large number of these contractors and freelancers were being treated as self-employed but the actual relationship with their client should have been classed as an employee. The terms and conditions of the contract would define this relationship.
HMRC argued that a large number of contractors would in reality be included on the client payroll and have tax and NIC deducted each month but were in fact disguising themselves as self employed behind a screen created in the 'Intermediary' setup.
Are all contractors/freelancers impacted by IR35?
All contractors and freelancers definitely have to assess their compliance for IR35 and suitable professional advice is highly advised.
Many of the client companies already appreciate the implications of IR35 and have amended their contractual arrangements to try and protect themselves and to ensure those contractor/freelancers providing services for them are outwith IR35. There is no room for complacency however and you should ensure whatever contract arrangements you have in place comply with the legislation.
There are several very useful resources online which can help guide you - amongst the best being ContractorCalculator who have a large amount of guides and information available. Similarly IPSE have comprehensive resources. Both of these organisations will advise you seek competent professional advice and highlight accountancy providers and legal advisors with expert knowledge.
The whole issue of IR35 compliance is such a grey area that in many cases it can be difficult to assess your position but certain factors weigh in your favour by ensuring the T's & C's and your contract conditions are framed correctly. In addition you should ensure your business 'behaviour' is the same as any other fully independant supplier in that you have all the accoutrements of a typical business - you have professional indemnity insurance, public liability insurance, you meet your own expenses, you can provide a 'substitution' service provider etc and simple things such as advertising your services can help. Obviously if you never advertise because all your business is gained by word of mouth or has been centred around a single client then the question has to be asked 'How independent are you and how do you secure new business?'.
Having a website can bring a certain legitimacy to your operations as an advertising channel that can demonstrate you do actively seek new business and clients. It is only one element of ensuring you are IR35 Compliance but it does give some peace of mind that you are demonstrably advertising and are trying to diversify and are open to secure new business. This is where we can help you in the provision of a hosting and website design package tailored to your business and particular expertise which serves as an advertising platform to market yourself to the wider world and bring you new clients and business prospects.
Our service includes integration with any other social media outlets you employ such as LinkedIn or Facebook. Any existing presence on there or elsewhere will be integrated into you main website and cross feed each other. If you don't have such an existing arrangement we will help you set up these valuable links.
Undoubtedly you will be busy in your particular field and with this in mind we ensure your website is simple to modify or update (from anywhere in the world via the Internet) and which is built to a professional standard and comprehensive in its capacity. The full package is priced at £100 per year plus a one-off setup fee (£100) and includes domain registration, web hosting and website design plus full technical support - all you need supply is details of your business and your CV - we do the rest.