Contractors & IR35
Contractors
As a freelancer, you want to be in control of your income, and move onto projects without the accountancy burdens and navigating through juniors/account managers to get the advice you require. At Wiseborne, you will be work closely with the partner to help you identify tax solutions and improve profits. You will not have a separate person undertaking your self assessment return, PAYE and VAT return which is usually the case at most accounting firms. It’s a unique competitive advantage that should help significantly when it comes to tax strategy.
We offer all inclusive services for contractors including…
- Company formation
- Annual Accounts
- Company tax returns
- Personal Tax Returns
- Company secretarial service
- Bookkeeping
- VAT Returns
- PAYE Returns
- Tax computations
- Review of contracts for IR35 status
- Provision of anti IR35 draft contracts
- Dealing with IR35 disputes
IR35 Legislation
First we would sit down with you and review your tax position to see if you are afftected by the IR35 legislation. There are many factors to consider here.
Fundamental factors to consider:
- Control
- The right to get a substitute or helper to do the job
- Mutuality of obligations
Other factors to consider:
- Provision of equipment
- Financial Risk
- Basis of Payment
- Opportunity to profit from sound management
- Part and parcel of the organisation
- Right of dismissal
- Employee benefits
- Intention of the parties
- Length of engagement
These are often matters of general employment law, and not specific tax legislation. There is an enormous amount of Case Law in this area and the Taxman is not always right. They do not have the final say on whether somebody is caught by IR35 or not. We can argue your case for you.
The cost of employees and employers national insurance if you get it wrong are considerable as well as interest and penalties.
We can review your existing arrangements and give you our opinion on whether it will stand up to attack from the Revenue. We can help draft contracts for services to assist you and advise on how you can maximise your chances.
How much is it?
We can offer cost effective packages specifically designed for contractors. Please contact us for further information and we will be happy to send you a qoute.
Frequently asked questions
Will I receive unlimited support? Yes. You will receive unlimited support free of charge and directly from the partner.
Do I need to purchase software? Not necessarily. You may not have the number of transactions to warrant purchasing accounting software in which case you do not need to. There are workarounds solutions i.e. excel that you can use instead and still be compliant with MTD VAT.
Should I use an Umbrella company? You will not face the risk of falling foul of the IR35 rules as you will getting paid via PAYE. So, that’s the main plus. You will also not need to worry about the admin burdens of running your own company. All you need to do is simply email your timesheet over to the umbrella company and they will then take care of the rest. The obvious disadvantage is that you may end up paying more tax and missing out on the advantages that come with using your own limited company.
Should I open a LTD company? A Limited company can often be the most tax-efficient structure through which to conduct your business. You can pay yourself a combination of salary and dividends to benefit from the different tax-free allowances available for each, make tax-free pension contributions through the company and leave funds in the business, to extract at a time of your choosing for further tax savings. The obvious disadvantage here being is the exposure to IR35. There will also be various admin requirements such as filing company accounts, VAT, Payroll and self-assessment that also needs to be considered and most people will require the help from an accountant.
Should I become self employed? This is a less popular choice for contractors amongst most professions. You will need to account for your income under the standard personal income tax rates unlike with running a company. Also, your personal assets are not protected from costs and legal claims as would be the case with a company. However, the administration burden will be a lot less in comparison to running your own company as you will be on Self Assessment.
So, which one should I choose? As can be seen from the answers above, this will be dependent on your particular situation, and crucially where you stand from the offset in respect to IR35. Any other income you and your spouse receive (i.e. rental income) also needs to be factored in when considering any tax planning. Some may even find that a combination of the three structures suits them best (i.e. using an umbrella company for one project and then your own company for another).