IR35 is a new law designed to reduce tax evasion among freelancers and contractors. Some workers were disguised employees, meaning they operated as permanent employees but were contracted through their own company to claim tax benefits.
Since 6 April 2021, the way the status of independent contractors is determined by the clients they work for has changed. Now, the onus is on the client to know whether their contractors are inside IR35 or outside IR35.
IR35 doesn’t apply to genuine contractors providing services. It could be anything from plumbing to accounting. Those contractors do not fall inside IR35 as long as they are not disguised employees.
Falling inside IR35 will prevent the contractor from using traditional tax-planning methods such as a small salary and high dividends to minimise tax obligations. Instead, the client will have to pay almost the entire fee as salary to the contractor, meaning income tax and NI will have to be paid.
Find out more about what IR35 means for your business and for your contractors, and how VinciWorks can help.
If you want to learn more about our IR35 reporting solution, complete the short form below and a member of our team will get in touch.