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Infographic: What helps and hinders IR35Launch infographic
You can ask an adviser, such as PayStream, to review your contract. But, you should not be misled in to thinking that this will automatically secure your status as being outside IR35. HMRC will make its own judgement about the relationship between you and the client and in doing so, will establish how you work in reality. It’s important therefore that your adviser also reviews your working practices. This is something that PayStream can help with too.
It is standard HMRC policy to carry out enquiries and no one can guarantee they will not be investigated.
IR35 enquiries tend to stem from standard PAYE or VAT enquiries. To keep your profile with HMRC low, you should keep your accounting records in order and ensure that your taxes are paid and up to date.
If you are definitely within IR35, things are simpler. Many contractors opt to use an umbrella company such as My Max from PayStream. As an employee of our company, we will deduct all necessary taxes and still help you to maximise your take-home pay.
When you use an umbrella like My Max, you become an employee of the umbrella company. Compliant umbrella companies will deduct employed levels of PAYE and NICs from your gross salary and pay them to HMRC on your behalf, just like any other company that directly employs you. That means you don’t have to worry about IR35.
The umbrella company will employ you allowing you to build up continuous employment with one company while you work on a number of temporary assignments. This is handy, for example, when making mortgage applications. An umbrella company will also process any allowable business expenses. Where possible, you should always get receipts for your expenses and send to the umbrella company as requested, or retain safely at home for 6 years.
There were major changes to the expenses rules in April 2016 such that there can be no reimbursement of ‘commute’ expenses for workers subject to (or the right of) supervision, direction or control in the way they carry out their work. Furthermore, expenses (other than mileage) cannot be reimbursed under flexible “salary sacrifice” arrangements.
If an umbrella company claims that it can reduce your income tax or NICs, or let you claim more expenses than other companies, walk away. Income tax, NICs and allowable expenses are set by HMRC and no company has the power to alter these. If a company “allows” you to claim for extra expenses, you will still have to prove to HMRC, in the event of an enquiry, that the expenses were genuine.
If you are genuinely running your own business, forming a limited company and operating outside IR35 is more tax-efficient because you can receive some of your income in the form of dividends. Your IR35 status does however need to be reviewed carefully. And from April 2021 the responsibility for determining your IR35 will lie with the end client in both the public and private sector.
All your returns and bookkeeping taken care of, a handy mobile app for expenses, an online portal for easy management, and a few other helpful extras too.Discover My PSC