IR35 is legislation which was introduced in 1999 to eliminate the avoidance of income tax and National Insurance contributions by using the likes of personal service companies in cases where a contractor would be regarded as an employee for tax purposes.
The new off-payroll working legislation (which amends Chapter 8 of Part 2 of Income Tax (Earnings and Pensions) Act 2003) comes into effect on 6th April 2021. This legislative update was due to come into force on 6th April 2020 but was delayed due to COVID-19. Although there has been some speculation, no plans have been confirmed to delay this again.
Using our expertise of IR35 within the temporary worker market and the IR35 legislation changes in 2017, we have developed our own IR35 Role Assessment Tool that determines where a contractor sits within the latest change. The assessment tool leads to an inside or outside IR35 decision, together with the next steps to be considered.
You can appeal the status determination statement with the end client via a disagreement process which the client will lead. The end client must provide a response within 45 days of receiving notification that you disagree with your employment status determination. During this time all parties should continue to apply the rules in line with your original determination.
As the director of your limited company, it is ultimately your decision whether to keep the company open. When there is no income being generated by your company, for example, you could choose to use ICS Umbrella as a vehicle to get paid.
If you envisage that you will undertake assignments with varying IR35 status (i.e. one inside, and then one outside) then you may wish to keep the company open, to use on assignments outside IR35), by using ICS Switch.
It is important to note that if you’re looking to claim Entrepreneurs Relief (a 10% rate of capital gains tax) on the funds in your limited company when closing (or via a Members’ Voluntary liquidation) then the disposal date must be within 3 years of the cessation of trade to be eligible for Entrepreneurs Relief.
For any help with closing your limited company or undertaking a Members’ Voluntary Liquidation, ICS Accounting is here to help.
This will be due to the decision that your end client has made. Your end client may no longer wish to engage with Limited Companies, or they may have decided that your role is within IR35 and therefore Umbrella/PAYE may be the best route for you.
If Umbrella is the route you are taking, there are many benefits that come alongside it. You will receive your statutory rights, holiday pay, auto-enrolment and with ICS Umbrella we have a huge range of discounts to suit all needs. You must also be wary of any “Tax Avoidance” schemes from non-compliant companies. Although this may look appealing at first, it will be you who has to pay back any unpaid tax.