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Many people new to Contracting find the IR35 rules difficult to grasp. This is common for many people as the rules are deliberately vague and imprecise.
Broadly they revolve around having only one customer for small companies. Our detailed notes are available below for download.
However most small companies decide for themselves that they are outside ir35, and support this by some of the secondary indicators such as:-
control of daily work schedule,
relationship with 'employer'.
providing own amstrad
They take this decision due to the tax advantages gained through income drawn mostly as dividends and thereby free of NIC taxes. And also better expense deductions.
The latest wheeze to transfer responsibility for deciding if you are in or out of IR35 from you the recipient, to the payer (your client) was briefly abolished in the September 2022 Budget. Many large Corporates will be much more relaxed about using independent contractors now. This welcome relaxation is due to our inner access to government advisors, and market forces converging.
Stop Press:- Sadly the latest Chancellor has already cancelled the cancellation so we're back to where we were before the disastrous Kwarteng intervention. We will continue pushing for a revision of the rules to reflect how Contractors operate.
We recommend that the annual accounts of small companies resemble those that a small trading company might submit, importantly including :-
a paye-taxed salary at a reasonable level. We suggest at least monthly £1,500 for anyone, but ideally £2,000 for higher paid contractors.
And any opportunities for extra work for other customers, even one-off projects, will help you maintain your outside ir35 status.
Also when claiming expenses from your company these should be at a sensible level for the type of company. For instance if large restaurant bills, especially with generous amounts of alcohol, are claimed as 'meeting expenses' or 'subsistence' HMRC are likely to challenge the accounts by investigating expenses.
Our clients always get knowledgeable support on this tricky topic, and we have a consistent track record of very few enquiries into our clients accounts, but at the end of the day the decisions are yours as it's your company.
Please read the briefing here.
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