With imminent IR35 changes on the horizon, Limited Company contractors should be aware of what those changes are, how to prepare, and just as importantly – how to stay IR35 safe.
In this blog, Intouch’s Operations Manager Neil Kellaway lets you know what you can be doing to help you stay IR35 safe, and what it actually means to be caught inside IR35, both now and post April 2020.
Pre April 2020
Should you be working as a Limited Company contractor within the Private sector and you’re found inside IR35, then a calculation is made at the end of the year to determine your ‘deemed salary’. This deemed payment / salary is then used to form the calculation of the National Insurance and Income Tax due on the total salary. You personally will not have to pay this amount, but it’ll be paid via your Limited Company and deducted from gross pay, so effectively the same as an employee.
You will be given the option to make a one-off payment at the end of the tax year, once the deemed salary has been calculated, or you’ll be able to pay amounts throughout the year based on the salary estimated as the deemed salary for the year. The benefits of the latter, means that your deemed taxes due will be spread evenly over the period of the year, and so you’ll have a smaller balancing payment each April.
All Public sector contracts IR35 status’ are determined by the end-hirer, so the decision (and subsequent tax responsibilities if your status is incorrectly defined) lie with the end-hirer.
Post April 2020
Regardless of whether your contract is Public or Private, come April 2020 your IR35 status will predominantly be the responsibility of the end-hirer (with a few exceptions). For more detailed information as to what these IR35 changes are, take a look at our blog: Changes to IR35 come April 2020
How can you stay IR35 safe?
As you can imagine, an investigation into your IR35 status by HMRC can be incredibly stressful, time-consuming and expensive, so getting your IR35 status correct first time is very important. That’s where the support and guidance of an expert contractor accountant such as Intouch comes in.
As part of our all-inclusive monthly service we offer all clients the following IR35 specific services:
Unlimited IR35 working practice and contract reviews – pre April 2020 our contract and working practice reviews give you clear guidance as to whether your contract is inside or outside of IR35, and gives you the confidence to challenge any aspects of your contract with your client before you commence work.
Post April 2020 our reviews can be shared with your end-hirer to show our expert IR35 view, and help with their final decision on your status.
Switch between Umbrella and Limited – you may find yourself in a position where you’re caught inside IR35, but the contract holds significant value to you (this maybe because the client is of great interest to you, or the contract will open future doors), so it’s still worth your time. But what happens when using an Umbrella company would suit your contract better than using your Limited Company?
At Intouch we allow clients to move freely between their Limited Company and our Umbrella solution, meaning that no matter your contract’s status, you’ll always be prepared with our Freeflex solution. And whilst you’re busy contracting using the Umbrella, your dedicated Intouch Personal Accountant will be busy in the background to keep your company affairs in order and up-to-date, ready for when you want to switch back.
IR35 specialist law firm support – Intouch is fully supported by our group company, Brookson Legal. They’re the only SRA regulated law firm that focuses solely on end-hirers and agencies, and we work closely with them to ensure the IR35 rules are applied correctly and the impact upon contractors is mitigated.
IR35 is not the end of the world…
If you’re found inside IR35 post April 2020 it’s not the end of the world, and you could even still end up taking home more than if you were in full time employment. Your dedicated Intouch Personal Accountant will be able to advise on your take home pay, and which trading option (ie through your Limited Company or an Umbrella company) is best for you and your contract.
If this sounds like the kind of support and service you need, get in touch today. Whether you’re just starting out or have already been contracting for a while, our team of expert contractor advisors will be able to guide you through this period of transition, smoothly and with your best interests and take home pay with the utmost importance.
This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.