[ad_1]
If you are an independent contractor and want to learn about IR35 then read this article. I’m a history IR35, what effect it will have on salaries and give you 3 ways to avoid being caught by it.
HISTORY OF IR35
IR35 is a piece of tax legislation that was implemented in April 2000. It was the Labour government to prevent what they describe as “disguised employment. That is, contractors working in exactly the same way as the employees of the company and pay themselves as if they were self-employed. Reports indicate that since April 2000 HMRC have worked less than 3% of IR35 their investigation. Although hugely unpopular and despite some calls for its abolition, IR35 still law today.
What effect IR35 will have on wages
There are several things that affect to take home your pay as tax code and the amount of allowable costs for companies that you can claim. Contractors are not caught by IR35 will generally pay a mixture of wages, expenses and dividends. Contractors caught by IR35 should usually pay themselves salaries and expenses only.
IR35 will reduce tax Pay 15%. Contractors not caught by IR35 will generally take home something in the region of 80% of the gross invoice of the contractor caught by IR35 will see this fall for something like 65% of the gross account.
3 Ways to avoid being caught by IR35
Check your contract.
A properly worded contract will contain the necessary recommendations for self-employment. These are RIGHT OF CONTROL, RIGHT off, Basis remuneration tools of the trade, TRADING structure of financial risk, business organization, terms of participation and mutual trust obligation.
If you are working in a recruitment agency, it is important to check not only the lower contract between you and the agency, but also the upper contract between the agency and the client. Discrepancies should be ironed out before they start a project.
sign IR35 confirmation letter with your client.
These little gems can often be the difference between successfully defend and IR35 investigation or pay the thousands to HMRC to retrospectively tax and interest.
Get your client to put his name and signature to a document that confirms your actual practices which, along with the upper and lower service devices will form a strong audit trail of the status of self-employment system.
The Physical Contract.
IR35 contracts and confirmation letters are not hard to accept, but they may not be Shams. Make sure you carry out tasks in accordance with the signed agreements. HMRC will pay close attention to the actual physical participation and not just what is stated in the contractual relationship data.
SUMMARY
So there you go, IR35 in brief and just about less than 1 minute. For more information about IR35 go to my website at www.freelancesupermarket.com .
[ad_2]