The tax avoidance rules known as IR35 have been in force since April 2000. They are designed to prevent employers and workers from reducing their tax and NIC bills by placing a company structure between the worker and the employer.
Unfortunately, it is difficult for HMRC to tell whether a small company has been inserted as an artificial step, or whether it is a genuine service business. If you operate through your own personal service company, you may need to prove to HMRC that your company is a genuine independent business and that you aren’t a disguised employee of your customer.
Here are some ways to show you are independent and that you are not caught by the IR35 rules:
- Work for several different customers, preferably concurrently, but certainly over a year
- Agree with your customer that you will provide a substitute if you can’t perform the contract personally
- Provide most or all of your own equipment
- Correct any faults in your work in your own time and at your own cost
- Work under your own direction as much as possible
- Don’t accept benefits which your customer normally provides to its employees
- Don’t attend social or training events hosted by your customer for its employees
- Don’t become part of the structure of your customer’s business
- Don’t become economically dependent on one customer
Do discuss your working arrangements with us if you are concerned that you could be caught by IR35.