Update on IR35 and a great tip if you think you will be caught by it

Author: Russell Smith
June 19, 2014

IR35 was introduced after lots of IT contractors decided to leave employment and set up limited companies to work for the companies they just left.

They enjoyed the tax benefit of being a limited company (generally the difference between 29% and 20% tax) but essentially only had one customer which made it look very much like employment.  HMRC didn’t like this but have been largely ineffective in stamping it out.

Because of this, the Office of Tax Simplification recommended that IR35 should be scrapped which would have been great.  However, the House of Lords has just finished a report which recommended reform rather than stopping it.

So, IR35 is here to stay but there are no plans to step up IR35 enquries so if you think you may be caught by IR35 and you want to avoid unwanted attention here’s a great tip….

On your personal tax return and end of year RTI form, don’t answer the question whether your company is a personal service business.  The law doesn’t require you to answer it and doing so will only flag your company as a potential target for an HMRC enquiry.

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