Despitethetitleofthisvideo, ifyouarewatchingit, itisquitelikelythatyouare a ratherarticulatepersonandprobablywiththehighskilllevel.
However, despitethis, likemostpeoplefacing a changeintheirworkingstyle, theyarefacedwithsomethingthatisnew.
Ifthepersonthatyouaregoingtoworkforaskyoutooperatethrough a limitedcompanyratherthanasanemployeeor a soletrader, youneedtoconsiderverycarefullytheimplicationsofftheprovisionsofftheinfamoustaxlegislationrefertoas I are 35.
Thisvideoisanattempttosimplifythefeaturesoff.
I are 35 as a startingpointforyoutoconsiderifthisappliestoyou.
Itis, however, nosubstitutefordetailedadvicerelatingtoyourspecificcircumstances.
Thathasbeen a historyoffhmrcchallengingthestatusofselfemployedsubcontractors.
Thispose a significantthreattothebusinessesthatusetheserviceisoffsuchsocontractors.
ShouldtheylosetheargumentwithHMRCaboutthestatusofftheindividualsworkingforthem, thentheywouldincur a substantialliability.
Buttaxandnationalinsurancethatshouldhavebeenpayableiftheyhadbeentreatedasemployeesinthefirstinstanceas a consequenceofthisbusinessisreactedbyrequiringtheirsubcontractorsoperatethrough a companywhichremovedthestatusthreatfromthem.
Itwas, as a consequence, off a significantlossofrevenuethatHMRCfacedbythistrend, that's I R 35 wasintroducedstatus, A centralissuethatunderlies I are 35.
Many, however, fallintothegrayareaofuncertainty, whichliesbetweenthesealternatives.
Thiscreatesthebackgroundofuncertaintythatmakes I are 35.
Such a problem I are 35 isapplicableinallcaseswheretheargumentaboutstatuswouldbelostandtheworkerwouldbeconsideredunbalancedtobeanemployeeratherthan a genuinelyselfemployedperson.
WheresuchanarrangementexistsonthetruenatureoftherelationshipiseffectivelythatOVENemployeethan I are 35 applies.
Whatistheeffectof I R 35?
Whereitapplies?
Theearningspaidfromtheendusertotheintermediarybodymustbesubjectto P A y E.
After a smalldeductionof 5% andafterthedeductionofanyexpensesthatanyemployeeswouldbeabletoclaim.
Thiscompels a significantamountoftheincomeearnedtobesubjecttotaxplusemployees, NationalInsuranceplusEmployers, NationalInsurance.
Thismeans a substantialamountoftaxandnationalinsurancewouldbepayable.
Iftheprovisionof I R 35 areignoredandthecompaniesusedtopay a minimumsalaryanddividendstoreducethetaxliability, thenthatislikelytobe a bigdifferencebetweenthetaxactuallypaidontheamountofthatshouldhaveBeanpaidhard.
I are 35 beenappliedastheyearsgoby, thisamountgetsbiggerandbigger.
Thisputsthecompanyatgreatrisk.
However, ifthecompanyfailstopayoverthetaxandnationalinsurancerequiredby I R 35 thenifHMRCfindoutaboutthesituation, theycangototheendworkeranddemandedfromthem.