Factors HMRC take Into Consideration to Determine IT Contractor IR35 Status
HMRC takes into consideration various things to determine whether you are IR35 compliant or not. IR35 regulations are complex and the decision on whether a contract complies with IR35 rules depends on various things. HMRC has to establish whether you are an employee or work as a director of an independent company. Here are the various things that will be used to establish your IT contractor IR35 status.
Employees enjoying permanent employment in certain companies experience no financial risk by going to work each day. Self-employed workers on the other hand face tons of financial risks purchasing the necessary equipment and supplies included. The risk depends strongly on the rate and length of the contract being handled. That simply means that if the contract is long, you are sure to invest so much on it which could leave you out of pocket. HMRC takes into consideration the financial risk involved in your everyday work experiences.
As an IT contractor, you are fully eligible for tons of employee benefits. Such benefits include but not limited to training courses, holiday and sick pay, pension contributions, annual staff parties. These are benefits that may make you eligible to IR35 or not. When signing up for a contract, you have to sign as a self-employed to enjoy the many IT contractor IR35 benefits.
Find out if you have the financial muscle to work on your own or your work will be managed by a client. Contractors are flexible enough to work freely on their own while workers are managed by clients. When managed by a client, you are supposed to pay the IR35 taxes.
Termination of Contract
Permanent employees usually have a notice period. As for independent contractors, they aren’t eligible for any notice. Their clients can terminate the contract once they feel like.
It is important to know that any self-employee-based contract that looks like a full-time employee contract will be considered inside IR35. In case you are caught unaware by the IR35 legislation, you will be safe from traditional tax if you already meet the set criteria. Using traditional tax-planning techniques to increase tax obligations put you at the risk of having to pay most of your fee income as salary which simply means that you will be taxed the same way a fully employed worker will pay. Your IT contractor IR35 status will be verified by checking out if your working practice will be in the form of self-employment or as employment. Outlined above are the core things that the IR35 responsible body will evaluate to determine if your contract is inside or outside IR35. Always use the right techniques to keep yourself from being taxed heavily by IR35 for contracts that could have been done without the need for taxing. You can learn more about IR35 tax and all you should do to make sure you are compliant by checking out various online resources. One of the best websites you can visit to learn more about IR35 is https://ir35.contractors