My Accountant Friend
The world of self-employment and tax is a crazy one at the moment. One minute you think you’re going to be paying extra dollops of national insurance, and the next you’re part of a huge U-turn. It’s all you can do to keep up.
While the governments work out what they want to do, we thought we’d take a bite of that other freelance hot potato: intermediaries legislation.
We’ve covered IR35 before, but as things become a tad clearer, it seems the right time to look more closely at what might constitute “in” or “out”.
Why is this important? IPSE (Association of Independent Professionals and the Self-Employed) has summed the problem up neatly here:
Also known as the “intermediaries legislation”, IR35 is intended to stop “disguised employment”. This is where employers engage their employees through limited companies, thus avoiding the need to pay Employer’s National Insurance Contributions, Sick Pay, and Holiday Pay, with the disguised employee also potentially able to benefit from a reduced tax bill.
Since HMRC aren’t keen on this happening, they need to determine the nature of your relationship with your employer. As IPSE puts it, “IR35 taxes the fees paid to limited companies in a manner similar to a salary where HMRC believes disguised employment is occurring. For IR35 to apply, HMRC has to determine whether the relationship between a freelancer and their client is in fact an employer-employee relationship, by referring to a number of complex and subjective tests established in case law.”
Since the “complex and subjective tests” are unclear, it’s very hard to predict whether a freelancer is going to find themselves inside or outside IR35. After some head scratching, we’ve put together a few ideas that may help you to make your position clear.
It’s a good idea to make sure you have a freelancing contract in the first place (unfortunately, many of us don’t bother).
No, we’re not talking about makeup supplies. However, we are talking about appearances. There are certain traits common to the freelancer that regularly employed workers don’t display.
We should note that these methods are not a guaranteed way of escaping IR35. However, many of them are natural to the way an honest freelancer would work anyway. While your mum always told you never to judge a book by its cover, in the case of IR35 inspectors, we suspect that appearances will count for quite a lot. Better to be safe than sorry, eh?
Get in touch with My Accountant Friend if you have any specific questions – 0121 396 1233 / firstname.lastname@example.org