Inside or outside IR35? It pays to know and that’s why we’ve explained the differences for you here. I’m a freelancer and contractor, so I’ve faced the IR35 question before. Is the job I see advertised inside or outside IR35? And does it matter?
What is IR35?
On 6 April 2021, HMRC introduced changes to IR35 rules. The changes are to ensure that if someone is working, for all intents and purposes as an employee, they pay the same tax as an employee.
Who works out if you’re in or out?
How do I know if my contract job is inside or outside IR35? Well, it is the responsibility of the end hirer to decide if the job is inside or outside IR35. It doesn’t matter if I’m working directly with an end hirer or through a recruiter, it is for the end hirer to decide.
I once saw a contract job at a university that was advertised through a recruitment agency. It was the responsibility of the university to decide if the role was inside or outside IR35. Not mine or the recruiter.
If you’re unsure of the status, you can find more guidance on how to check employment status for tax on the Gov.UK website.
What does inside IR35 mean?
If your contract is inside IR35, you will have to pay Income Tax and National Insurance Contributions, just like you would if you were employed by your local supermarket, for example.
So, if the end hirer indicates that the assignment is inside IR35, then the fee payer will be responsible for:
- Making PAYE RTI submissions to HMRC
- Deducting PAYE tax
- Deducting National Insurance
- Paying employers’ National Insurance contributions
What does outside IR35 mean?
You will be considered self-employed if your contract is outside IR35. That means you can enjoy the tax efficiency that self-employment can bring. However, you will not receive employee benefits, such as sick pay.
If you provide services to clients through a Limited Company, you will be responsible for paying your business’s taxes from there. Don’t forget to ensure you’re making National Insurance contributions too.
Guidance on IR35 for employers
The IR35 changes implemented in April 2021, may have meant changes to the way in which you pay your contractors. If you need help with your payroll, we’ve outlined how we can help.
And if you run a small business, assessing IR35 status may not be rquired of you. Find out more on which businesses are exempt here.
Professional advice on IR35
It can be best to seek the services of an accountant to make sure that you have paid HMRC the tax owed. In addition, they will be able to advise you on the most tax efficient way to pay.
If you are looking to stay outside IR35, then in conclusion, speaking to an accountant is even more important. You are effectively running yourself as a business. And as a business, you’re going to need an accounts team.
About Liz Cordell
I’m an experienced copywriter, with a great attention to detail. Having previously held positions at a global publisher, a top 100 law firm and a Big Four professional services firm, I now work with clients across a range of industries. Whether it’s new content for a website or creating interesting blogs for my clients, I can create engaging copy that doesn’t take a lifetime to read.