Various Provisions of IR35 Rules

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Various Provisions of IR35 Rules

Posted On : Jul-16-2011 | seen (749) times | Article Word Count : 419 |

IR35 rules come into existence as law to ensure that contractors are subject to same tax laws as applicable to people working on regular jobs under regular PAYE conditions.

In case you have been working as a freelance contractor In IT industry; it is likely you are already acquainted with IR35 rules and regulations. All contractors who don’t fall under Inland Revenue's classification of 'self employment' are affected by it. It was passed as law through Schedule 12 of the Finance Act 2000. The purpose was to prevent freelance contractors from making their income by taking small salaries and much more by way of dividends from their clientele limited companies. The law ensures that contractors are subject to same tax laws as applicable to people working on regular jobs under regular PAYE conditions.

The chief reason for putting in place the IR35 rules are manifold as there are many professionals in the IT industry who left their regular jobs only to return as contractors working via a limited company. By doing so, they would be getting paid lot more for doing the same job. Working as a freelancer they would be required to pay less tax and insurance in proportion to what they earn. It is Inland Revenue which decides whether your employment falls within the purview of IR35 rules or not by ascertaining if that person is ‘employed’ or ‘self employed’.

If you are working at office in usual 9-5 routine using equipment provided within the premises of the office, you would be considered an employee as per the directions of Inland Revenue. The IR35 rules would apply on you. In case you’re working from home using your own equipment for work and have number of clients whose work you are handling, you will be considered as self-employed under the rules. Inland Revenue assesses your employment status and would decide your status based on their investigations. If they determine your employment status as ‘Self-employed, you would be able to avoid the IR35 rules.

It is imperative that before accepting any IT contract you should ensure that terms and conditions of the contract clearly demonstrate their agreement with the IR35 rules and regulation. The contract should not in any way indicate that you are an employee of your client. Moreover, the IR rules are not applicable on the person but on every individual contract. In case you enter into 4 or 5 contracts a year, it does not imply every contract would fall within the purview of IR 35rules. Each individual contract would be treated differently. If you want to avoid falling within the jurisdiction of IR35 rules, you must demonstrate that you are self-employed.

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<h1>Various Provisions of IR35 Rules</h1> Author: <a href='http://www.articleseen.com/profile_Article Expert.aspx'>Article Expert</a> In case you have been working as a freelance contractor In IT industry; it is likely you are already acquainted with IR35 rules and regulations. All contractors who don’t fall under Inland Revenue's classification of 'self employment' are affected by it. It was passed as law through Schedule 12 of the Finance Act 2000. The purpose was to prevent freelance contractors from making their income by taking small salaries and much more by way of dividends from their clientele limited companies. The law ensures that contractors are subject to same tax laws as applicable to people working on regular jobs under regular PAYE conditions.

The chief reason for putting in place the IR35 rules are manifold as there are many professionals in the IT industry who left their regular jobs only to return as contractors working via a limited company. By doing so, they would be getting paid lot more for doing the same job. Working as a freelancer they would be required to pay less tax and insurance in proportion to what they earn. It is Inland Revenue which decides whether your employment falls within the purview of IR35 rules or not by ascertaining if that person is ‘employed’ or ‘self employed’.

If you are working at office in usual 9-5 routine using equipment provided within the premises of the office, you would be considered an employee as per the directions of Inland Revenue. The IR35 rules would apply on you. In case you’re working from home using your own equipment for work and have number of clients whose work you are handling, you will be considered as self-employed under the rules. Inland Revenue assesses your employment status and would decide your status based on their investigations. If they determine your employment status as ‘Self-employed, you would be able to avoid the IR35 rules.

It is imperative that before accepting any IT contract you should ensure that terms and conditions of the contract clearly demonstrate their agreement with the IR35 rules and regulation. The contract should not in any way indicate that you are an employee of your client. Moreover, the IR rules are not applicable on the person but on every individual contract. In case you enter into 4 or 5 contracts a year, it does not imply every contract would fall within the purview of IR 35rules. Each individual contract would be treated differently. If you want to avoid falling within the jurisdiction of IR35 rules, you must demonstrate that you are self-employed.About the Author: Helix Management is a leading name in providing tax efficient payment services like Self Employed Tax and <a rel="nofollow" href="http://www.helixcontractor.co.uk/">Contractor Tax</a> calculator and disguised remuneration etc. Find a concise overview of the <a rel="nofollow" href="http://www.helixcontractor.co.uk/">IR35</a> rules. Article Source: <a href='http://www.articleseen.com/Article_Various-Provisions-of-IR35-Rules_66906.aspx'> http://www.articleseen.com/Article_Various Provisions of IR35 Rules_66906.aspx</a>

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Helix Management is a leading name in providing tax efficient payment services like Self Employed Tax and Contractor Tax calculator and disguised remuneration etc. Find a concise overview of the IR35 rules.

Keywords : Contractor Tax, Contractor Tax Calculator, IR35, IR35 Rules,

Category : Finance : Taxes

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