The short version: IR35 is tax legislation aimed at catching “disguised employees.” People who work like employees but operate through their own company to pay less tax. If IR35 applies to you, you pay roughly the same tax as an employee would.
Why does it exist?
Contractors working through limited companies can be more tax efficient than employees. Lower National Insurance, dividend income, control over when you take money out. Some people and businesses exploited this by setting up arrangements that looked like employment in all but name.
IR35 is HMRC’s way of closing that gap. If your working relationship is essentially employment, you should pay employment taxes.
How do you know if it applies?
It depends on factors like how much control the client has over your work, whether you could send a substitute, whether you’re part of the client’s organisation, and how you’re paid. HMRC has a tool called CEST to help assess status, though it’s not always conclusive.
Who decides?
For work with medium and large private sector clients, or any public sector client, the client decides your IR35 status. For small private sector clients, you decide yourself.
Worried about your IR35 status? Get in touch and we’ll help you assess your situation.
