IR35

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 and 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.

IR35 was introduced because the Government believed that some people were providing their services through a limited company or a partnership as a means of avoiding tax.
Some advice and guidance on the general process HMRC enquiries generally follow and the steps to take.
This guide provides a comprehensive overview of IR35 and includes advice on working out your IR35 status, drawing up an action plan to address any weaknesses in your position and establishing a paper trail ready to defend against any Revenue challenge.
There has been concerns that HMRC has updated the employment status manuals (ESM) on its website to reflect recent ‘IR35 victories’ - namely Dragonfly Consultancy Ltd and Larkstar Data Ltd.