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IR35 can be a confusing topic, with many self-employed professionals likely left unsure of what falling ‘inside’ or ‘outside’ of the legislation means for them. Here, we take a look at what you need to know about falling ‘inside’ IR35.

What is IR35?

IR35 is a legislation used to determine a contractor’s working status by looking at their levels of risk, liability and responsibility in the workplace.

You can either fall ‘outside or ‘inside’ of IR35.

If a contract shows that a worker has the same level of risk, liability and responsibility as other contractors, they will be seen as ‘outside’.

If, however, a contract is seen as being similar to that of a permanent employee, then the worker will fall ‘inside’.

Each contract is treated separately, which means it’s possible for an IR35 status to change with each client.

Read our Guide to IR35 page for more information.

How is a contractor’s IR35 status decided?

Before April 2021, contractors would work out their own status, however, it is now the responsibility of the client to make that decision.

Unfortunately, these changes have proved problematic for those in the self-employed sector due to many businesses feeling that it is ‘safer’ to blanket-access all of their contractors as being inside IR35 to avoid giving the wrong status.

There is a government tool called the Check Employment Status for Tax (CEST), which can be used to determine a worker’s employment status by looking at the contractor’s personal service, control and mutuality of obligation.

However, CEST has been criticised due to reports showing that it has often failed to deliver by not always giving an accurate employment status determination.

Read our IR35 Rules page for more guidance on what HMRC considers when looking at a contract.

So, what does inside IR35 mean for contractors?

As mentioned previously, falling inside means that you’re seen as having a similar setup to those who are employed.

This means being subject to the same tax rates and National Insurance (NI) as an employee, which can consequently result in paying more than you would if you were outside IR35.

Your status will also have an effect on your self-employed benefits – you’ll be more limited when it comes to the type of expenses you’re allowed to claim back on.

You can see why IR35 is a topic that has caused so much debate and criticism over the years when you consider the fact that not only can it be difficult to clarify a status, but being put in the wrong category can cost you benefits that you might otherwise have been entitled to.

We hope you found this page helpful. If you have any further questions about IR35 or anything else, our team of experts are available to answer any queries, so give us a call on 01442 795 100 or email jaime.thorpe@dolanaccountancy.com. Alternatively, contact us via live chat.

Why Thousands of Contractors Choose Dolan Accountancy

With over 25 years experience in contractor accountancy helping thousands of contractors, freelancers and the self employed, Dolan Accountancy has the specialist skills, reputation and credibility you can trust.

Working closely with our sister company, Contractor Umbrella, it means we can offer one low cost, fixed fee package at £125 + VAT. This gives you the flexibility of using both our Limited Company Accountancy Services and our award winning Umbrella Service, for one inclusive cost.

If you’d like to find out more about how Dolan Accountancy can help you and your business, please give us a call on 01442 795 100 or email sophie.lewis@dolanaccountancy.com or jaime.thorpe@dolanaccountancy.com.

We don’t believe in tiered packages or hidden extra fees, instead we aim to give you everything you need, including:

  • Free Company Formation – This is where it all begins. Once you have decided on an available name, we will form your company free of charge (if using our accountancy services) and it will be ready for you to use in as little as three hours
  • Free use of Contractor Umbrella – With IR35 Legislation changes we understand that sometimes you are required to contract via an umbrella company. We will keep your limited company ticking over, while you work margin free via our sister company, Contractor Umbrella
  • A Dedicated Accountant – Your accountant will be there for any company or personal tax advice that you require. We will never outsource work, even to internal teams
  • Free Access to FreeAgent – We offer all of our clients access to FreeAgent, free of charge
  • Free Business Banking – We have decided to waive our commission so our clients can use Tide free of charge for the first year
  • Unlimited IR35 Status Reviews – We will review all of your contracts for IR35 purposes and provide you with our professional opinion as to its status
  • Free Registered and Director’s Service Office Address – Sometimes you just don’t want your home address on display at Companies House. When you sign up to our accountancy services, we will offer the use of our address as an alternative
  • Your Business and Personal Taxation Needs – This includes Company Accounts, Director’s Personal Tax Return, VAT Returns, Payroll, Corporation Tax and Dividend advice, to name just a few
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