IR35
In the 1999 Budget, new rules were provided by the Inland Revenue
under news release 'IR35'. These rules have since become commonly
referred to as 'IR35'. The purpose of them is to remove opportunities
for the avoidance of tax and Class 1 National Insurance Contributions
(NICs) by the use of intermediaries, such as service companies
or partnerships, in circumstances where an individual worker
would otherwise be an employee of the client or the income would
be income from an office held by the worker. This was done by the
Government in order to achieve a tax system under which everyone
pays their fair share.
In the past there were concerns about the hiring of individuals
through their own service companies so that they could potentially
exploit the fiscal advantages offered by a corporate structure.
Previously, it was possible for someone to leave work as an employee
on a Friday, only to return the following Monday to do exactly the
same job as an indirectly engaged 'consultant' paying substantially
reduced tax and National Insurance Contributions.
The Government introduced IR35 to stop such a thing happening.
The aim of this is to ensure that people working in disguised employment
will, in practice, pay the same tax and National Insurance Contributions
as someone who is directly employed. Businesses employing their
workers directly were previously unable to compete with those encouraging
the avoidance mentioned above. This meant that ordinary workers
could find themselves unable to compete for jobs with those who
were self-employed.
Those who become these 'consultants' often have to pay a price
in terms of loss of protection under employment law. They may find
their terms and conditions altered; perhaps losing entitlement to
sick pay or maternity leave. They may even lose their jobs without
entitlement to notice or redundancy pay. They will usually have
no right to any claim for unfair dismissal and may lose their entitlement
to social security benefits through a failure to make adequate contributions.
Therefore, they are taking a risk in undertaking this new role,
but they can deem it as a risk worth taking.
If you have any queries about whether or not your partnership is/will
be affected by IR35, call Academy Accounting Ltd today on 0141 891
5999 or e-mail us at enquiry@academyaccounting.co.uk. IR35 is a
very tricky subject to understand and can be a potential minefield
to those who are unaware of it. A simple call to us is all that
is required, and we can set your mind at ease and legalise your
payroll accordingly.
|
