What Are Ir35 Rules?

By Author: Abbey smith
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The IR35 rules or intermediaries legislation, to give it its original name, is legislation that covers the self employed who supply services rather than products to third parties. The rules were introduced in April 2000 in an effort to stamp out a common tax evasion method known as disguised employment.

As a general rule, employing someone as a permanent employee costs a firm more per hour than it does if they bring a contractor in. The reason for this is that with a permanent employee the firm must pay national insurance contributions, tax, holiday and sickness pay and in some cases a pension contribution on top of that person's hourly pay. In some situations, they also have other overheads, such as equipment, uniforms, limited health care and some forms of insurance.

During the late 1980s, firms began to move away from employing permanent employees and started using contractors. The problem was that, in reality, these contractors were permanent employees. They did the same job for the same hours, for years.

In addition, these contractor employees paid less income tax than they would have done had they ...
... been part of the PAYE system. Some people were taking it even further and being paid via an intermediately in dividends instead of a salary avoiding paying even more tax. This meant a drop in revenue for the taxman. In addition, it was also eroding employee rights.

IR35 legislation was primarily introduced to identify people who were working like this and to stop them from doing so. As a result, if you work as a freelancer or contractor you really need an expert accountant to help you to deal with this legislation.

Finding an Accountant Who Understands the IR35 Rules

It takes an experienced contractor and freelance accountant to understand the IR35 rules. If you can find one that specialises in doing contractor accounts that is best. The way IR35 works varies slightly across the professions. If you can find an accountant with a broad client base, it is better for you. This is because they are more likely to have the necessary knowledge and experience to look after contractors from your profession.

Beevers and Struthers, the specialist freelancer and contractor accountants have decades of experience, so are well placed to help you deal with the IR35 rules.