IR35 is a new law that allows HMRC to collect additional taxes if they consider that a contractor could be, in fact, a “disguised employee”.
The purpose of IR35 is basically to make companies pay the right amount of Income Tax and National Insurance (for example, the NI that self-employed contractors pay is lower than the rate employees pay).
Some of the main things that HMRC looks at, if you’re a contractor:
- do you have to do the work personally, or can they send someone else instead?
- do you have to carry out any task that an employee would normally do (like managing other employees)?
- does your client get to decide how, when, and where you do the work?
If the answer is “yes” to any of these, you might just be a disguised employee – at least according to the HMRC. HMRC might make your client place you into their payroll and will tax them Income Tax and NI at employee rates.