Tips on Improving your IR35 Position
The IR35 is a piece of tax legislation that is strategically crafted to prevent tax avoidance by people pretending to be self employed while in actual fact they are not. This piece of legislation aims to increase tax revenue to the state, and at the same time discourage all attempts at violating the spirit of the tax code. The IR35 legislation is particularly targeted at individuals who offer services to customers or clients under the umbrella of a type of company known as a personal service company.
If a person falls under the IR35, it basically means that the tax revenue collecting body, the HMRC, views them as disguised employees, rather than as employers who are entitled to certain tax breaks and advantages by virtue of them being job creators. The silver lining in the cloud is that there are many things that you can do so as to not fall under the discerning gaze of the IR35.
1) Compilation of evidence that shows why you do not deserve to fall under the IR35
It helps to prepare before the storm. This just means that you should have a specialist come to your company offices to review your contracts and your working conditions. The report that the specialist will then write can be used as evidence to show the tax authorities why you do not deserve to fall under the IR35. It would be a miscarriage of justice to fall under this piece of legislation while in reality you are a legally self employed person. Having your income taxed at fifty percent instead of twenty percent could prove to be disastrous to your budding business.
Having a set of documents that outline why you are legally self employed and not just using a personal service company to avoid tax would also be very helpful in making sure that nothing bad happens to your business.
2) Make your Company look and Feel Legitimate
The very next thing that you should do is to make your company look and feel legitimate. Simply working from your home office will not cut it, unfortunately. It would be prudent to rent an office away from your home (if your business can afford it of course). Having company stationery for example business cards and stamps made would also enhance the professional image of your company. This would help to make your company more real and more eligible to fall outside the reach of the IR35 legislation.
With the IR35 piece of legislation, it is the little things that a person does to make the company more and more professional (and genuine) that will count the most. It would also not hurt to have other people working for you or substituting for you every now and then. This would imply that your company is fully operational to the point of having other people working for it.
Other things that you can do include taking out business insurance and ensuring that you work for as many clients as possible. Only working for one client is one sure to fall under the radar of the IR35.
The IR35 is a piece of tax legislation that is strategically crafted to prevent tax avoidance by people pretending to be self employed while in actual fact they are not. This piece of legislation aims to increase tax revenue to the state, and at the same time discourage all attempts at violating the spirit of the tax code. The IR35 legislation is particularly targeted at individuals who offer services to customers or clients under the umbrella of a type of company known as a personal service company.
If a person falls under the IR35, it basically means that the tax revenue collecting body, the HMRC, views them as disguised employees, rather than as employers who are entitled to certain tax breaks and advantages by virtue of them being job creators. The silver lining in the cloud is that there are many things that you can do so as to not fall under the discerning gaze of the IR35.
1) Compilation of evidence that shows why you do not deserve to fall under the IR35
It helps to prepare before the storm. This just means that you should have a specialist come to your company offices to review your contracts and your working conditions. The report that the specialist will then write can be used as evidence to show the tax authorities why you do not deserve to fall under the IR35. It would be a miscarriage of justice to fall under this piece of legislation while in reality you are a legally self employed person. Having your income taxed at fifty percent instead of twenty percent could prove to be disastrous to your budding business.
Having a set of documents that outline why you are legally self employed and not just using a personal service company to avoid tax would also be very helpful in making sure that nothing bad happens to your business.
2) Make your Company look and Feel Legitimate
The very next thing that you should do is to make your company look and feel legitimate. Simply working from your home office will not cut it, unfortunately. It would be prudent to rent an office away from your home (if your business can afford it of course). Having company stationery for example business cards and stamps made would also enhance the professional image of your company. This would help to make your company more real and more eligible to fall outside the reach of the IR35 legislation.
With the IR35 piece of legislation, it is the little things that a person does to make the company more and more professional (and genuine) that will count the most. It would also not hurt to have other people working for you or substituting for you every now and then. This would imply that your company is fully operational to the point of having other people working for it.
Other things that you can do include taking out business insurance and ensuring that you work for as many clients as possible. Only working for one client is one sure to fall under the radar of the IR35.