IR35 aka the contractor tax
In April 2000 the HMRC introduced new tax rules called IR35, its goal was to prevent contractors cheating the Government out of tax repayments. It was Alright for a number of businesses, and staff of these companies neglecting to pay their taxes, but the government accepted that as a perk of their jobs, however IT contractors, who do they suppose they are not paying their tax, I was going to name a profession here but that might most likely be libellous, but I believe you already know which one I mean.
As IR35 was introduced, HMRC were rubbing their hands because of the the money they were going to receive, and the contract recruitment agencies were getting nervous since they thought the world was going to come to an end. However, the experienced contractors were just making an attempt to work out how much they must pay to work out a workaround. There must be one, there is for everything else, even for Microsoft office.
This all took place because individuals were having the audacity to depart a company they had worked at for years, form their very own a firm, and after that get rehired as a freelance advisor at their former company. This had the effect of decreasing their tax and Nationwide Insurance liabilities. The implementation of this Contractor Tax brought in regulations corresponding to a certain time needed to elapse earlier than you might be rehired at a company, you may not use the company facilities, there was a restrict to how lengthy you can work there on a single contract, in truth something that could make you look like an worker of the company.
When it was first launched, accountancy companies, umbrella companies, and recruitment agencies, set out on a mission to develop IR35 compliant contracts. If they didn't they'd certainly see a reduction in income. It was not long before contractors were going to ask if the contract would be IR35 compliant before they even went to an interview. Life was getting a bit harder with the introduction of this contractor tax, but not impossible.
After just a few years it all settled down, so much so that only a few individuals know the issue ever existed, only the contractors who have been there at the beginning. For those who go to any umbrella firm, recruitment agency, or even an accountant who specialises in dealing with contractors, they will routinely verify for the legality of the contract without anyone asking. The HMRC torque took hundreds of contractors to court docket over the IR35, aka the contract tax, however I think you'll be able to count their victories on one hand. I do probably not perceive why the government got so upset with contractors, we had been only working inside the rules, and paid everything our accountants told us we had to, hold on hasn't somebody else mentioned that recently. I recall who it was, no, sorry, libellous again.
