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IR35 Legislation and Personal Service Companies, are you covered?

30 September 2015

IR35 legislation is intended to tackle the avoidance of Tax and National Insurance Contributions (NICs) through the use of intermediaries such as service companies or partnerships.  The rules look to examine the circumstances where a worker would be ordinarily be treated as an employee of the company to whom they work, if it were not for the existence of the intermediary. Where this is a limited company, the worker can take money out in the form of dividends instead of salary. Dividends provide an advantage to the worker as the tax paid is currently less and they are not liable to NICs and therefore pay less than either a conventional employee or a self-employed person.

The IR35 legislation applies to income earned in respect of work done under contracts which would have been under a contract of employment if the worker had been working direct for the client. They do not introduce any statutory definition of employment or self-employment, so the existing case law will still apply to decide employment status. The rules catch those employed in a domestic situation – eg nannies – as well as workers in the wider business sense.

We have a connection with a IPSE regulated firm of Accountants who will be able to review your existing contract for IR35 legislation compliance and discuss with you what steps you need to be taking upon the creation of your new or existing company.   If you would like to be put in contact with them please email us at support@samedaycompany.co.uk.