IR35

IR35: the "Intermediaries Legislation" and working as a Freelance Contractor or Consultant.

IR35 applies if you carry out work through an “intermediary” – typically a limited company of which you are a shareholder with a holding of more than 5% - to an end-user under circumstances in which, were there a contract direct between yourself and that end-user, that contract would be one of employment.

IR35 was announced in 1999 as an anti-avoidance measure.  It seeks to deny that freelance contractors are genuinely in business and to tax them as employees without establishing a proper employment relationship. Its extraordinary complexity makes it almost impossible for contractors to assess whether they fall within it or not - in some cases their status may rest on contracts they have never seen.

PCG was originally formed in response to IR35 by a group of contractors who realised that, if it had been in place earlier, they would not have been able to start their own businesses. Its unfairness and complexity remain the biggest single grievance and difficulty for freelance contractors.

Since IR35 came into effect, PCG has supported numerous cases in order to establish as much clarity as possible. This strategy has been successful: IR35 remains complex, but with effort and good advice it is possible to structure commercial relationships with clients that are outside IR35. Recent cases have threatened this, however, and PCG is again supporting its members in court to maintain the defence against IR35 wherever possible.

Introduction to IR35
PCG was formed in 1999 to protest against the Government's IR35 proposals. The organisation has come a long way since then, but IR35 remains a major issue for members. This document offers a brief overview of IR35. 

Guide to IR35 Members
A full consideration of IR35 from the contractor's perspective: includes advice on how to decide whether or not you are caught and what action to take, plus an up-to-date assessment of the current legal position. This Guide was updated in December 2008 to include the consequences of the Dragonfly case. Available to PCG members only.

PCG Policy Briefing: IR35
IR35 has now been in operation sufficiently long for its efficacy to be assessed. It is clear that by any sensible measure, it has been a failure.

Dragonfly IR35 case - High Court
The High Court rejected the appeal of Dragonfly Consultancy Ltd. This case has potentially significant implications for IR35 defences, and PCG will be updating its guidance to members shortly. All material on this page should be read with this in mind. See also PCG's initial press release.

Dragonfly IR35 case - Special Commissioners
A summary of the key facts in the Dragonfly case prior to the High Court hearing in June 2008.

PCG Guide to Freelancing
 
IR35 Payback Scheme

PCG and Accountax have developed a scheme that will enable many freelancers to reclaim the tax they have paid under IR35.

The scheme is available to PCG members who have paid up at any time since the inception of IR35 in April 2000 and who have paid “deemed salaries” in excess of £30,000 under IR35.

Benefits of the scheme:

  • No win, no fee: there is no risk in applying for the scheme, since fees are taken only after the tax has successfully been recouped from the Revenue.
  • Accountax will defend any Revenue enquiries up to and including the First-tier Tribunal.  Accountax have an unrivalled track record at the tax tribunals so you can be assured of the best possible representation.
  • All returns of tax and national insurance are guaranteed against subsequent Revenue challenge for six years: Accountax will handle those queries and if necessary defend the case at the First-tier Tribunal without further professional fees being charged. Even in the unlikely event of such a challenge being successful, the freelancer would be indemnified under the scheme and so could keep all monies refunded.

All you have to do is send Accountax your contracts for the periods when the tax was paid and they will take care of the rest! Call 08450 660 035 if you have any queries or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it .
 


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