IR35 aka the contractor tax
In April 2000 the HMRC brought in legislation called IR35, its purpose was to prevent contractors cheating the Treasury out of tax payments. It was Alright for certain companies, and staff of those businesses neglecting to pay their taxes, but the government saw that as a perk of their jobs, but IT contractors, who do they think they are avoiding tax, I was going to name a group of people here but that might probably be libellous, however I think you know which one I mean.
As IR35 was brought in, HMRC were rubbing their hands at all the money they were going to get, and the contract recruitment agencies were getting nervous since they thought the world was going to come to an end. Nonetheless, the dyed in the wool contractors were simply trying to work out the amount they must pay to work out a workaround. There had to be one, there is for everything else, even for Microsoft office.
This all took place because folks had the audacity to depart a company that they had labored at for years, start their own a new firm, and then get rehired as a consultant at their previous company. This had the impact of reducing their tax and National Insurance coverage liabilities. The implementation of this Contractor Tax brought in rules comparable to a certain time needed to elapse earlier than you could possibly be rehired at an organization, you could possibly not use the company amenities, there was a limit to how lengthy you may work there on a single contract, in actual fact something that might make you appear to be an employee of the company.
When it was first introduced, accountancy firms, umbrella firms, and recruitment companies, set out on a mission to develop IR35 compliant contracts. In the event that they did not they might surely see a reduction in income. It was not a great time before contractors were going to ask if the contract would be IR35 compliant earlier than they even went to an interview. Life was getting a bit more difficult with the launch of this contractor tax, however not impossible.
After a couple of years all of it settled down, so much so that very few folks know the problem ever existed, solely the contractors who were there at the beginning. For those who go to any umbrella firm, recruitment agency, and even an accountant who specialises in dealing with contractors, they'll automatically verify for the legality of the contract with out anyone asking. The HMRC torque took a whole lot of contractors to courtroom over the IR35, aka the contract tax, but I feel you can count their victories on one hand. I do probably not understand why the government got so upset with contractors, we were just working inside the rules, and paid every thing our accountants instructed us we needed to, hold on hasn't somebody else stated that recently. I recall who it was, no, sorry, libellous again.
