Many contractors own limited liability companies so that they can invoice clients and remunerate themselves from the proceeds.  This is tax efficient because salaries can be subsidised by dividend payments. A portion of those dividend payments are free of National Insurance and personal tax, but before swapping into a contract relationship, contractors must consider IR35.  IR35 legislation stops ordinary employees from swapping full time employment for a contract relationship, solely to avoid tax.

Xperian Recruitment’s contracts support IR35 with the key points, as follows:

IR35 – Scope of work

The scope of work defines the work to be completed and it avoids general points of ownership or responsibility.

IR35 – Right to substitution

With reasonable notice, you can substitute yourself for another equally qualified individual during the term of your contract.

IR 35 – Notice period

A supply contract is not an employment contract, so notice periods don’t rest comfortably with IR35 compliance.  However, the HMRC is lenient with notice periods of no less than 1 month.

IR35 – Business-like trading

Business owners cannot run invisible businesses.  To be IR35 compliant, HMRC will require evidence of a genuine trading entity. Think of the evidence they are looking for as the usual trappings of business. These include insurances, VAT registration, business cards, a website and other marketing elements.

Ensuring that you’re IR35 compliant

Xperian Recruitment will help you to understand your obligations under IR35. Feel free to contact us for a confidential discussion.

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