What is IR35?

There are a few steps you'll need to consider with hiring contractors. These include:

• Sourcing for contractors
• Assessing contractor CVs
• Interviewing a contractor
• Payments
• Contract terms
• Terminating a contract

IR35 is a piece of legislation which allows HMRC to treat private contractors as if they were employees. It was introduced to combat the problem of "disguised employment", where employees offer their services via limited companies to pay less tax and National Insurance.

As an independent contractor, there may come a point in time where you need to consider subcontracting-you might decide to take on work as a subcontractor, or hire a subcontractor for your projects.

Whichever option you're exploring, how do you decide if the benefits truly outweigh the cons? And are there important tips you need to keep in mind?

So, you're thinking of becoming a contractor.

There's probably one of three reasons driving this:

You've received a Job Offer

You've just received a job offer, and now need to decide on whether to set up a limited company, umbrella company or become a sole trader (or you may not have the choice in deciding).

You're in the right place.

This guide will walk you through the best company structure for you, accounting support, VAT, business services you need to consider and finding new opportunities.

You want to increase your pay

You'd like to increase your pay by switching from permanent roles to interim/ contractor roles.

Contracting can be very lucrative.

You'll need to be comfortable with a certain level of risk (short notice periods), increased monthly admin (as a Limited Company) and less benefits than being an employee (paid leave, sick days).

However, you'll earn more, get greater flexibility and hopefully grow a consulting business.

Project Flexibility

Getting multiple requests for your services? Amazing.

Setting yourself up as a contractor through a Limited Company means you can start expanding your client base rapidly and work on different projects a few days a week.

You can still set this up as a current PAYE employee of a company, and this can be a great stepping stone to launching your own business.

Let's talk about the right business structure for you.

IR35 means that contractors will need to consider their true employment status when working on an assignment to ensure that the correct tax is paid according to their status. This is currently especially true for those working in the private sector (in the public sector, the contractor will often be told their IR35 status before the engagement begins).

You've been thinking about making the leap from employee to self-employed. If contracting is one of the options you're considering, this article is for you.

We'll run you through the basics, including what it means to be a contractor, how it differs from full-time employment and the type of business structures that contractors typically choose.

Contractors are self-employed individuals who provide services to a business. Generally, they're highly skilled, and are hired for projects that require specialist skills or to bolster a team during busy periods.

The advantages of contracting are:

• Flexibility: Contractors have a lot more control over their work life often deciding when they work, where they work and how they work
• Increased earnings: Contractors are often paid more due to their skillset and the flexible nature of their working relationships. Additionally, contractors who operate through their own limited company can benefit from tax efficiencies.
• Greater development: Often working with multiple clients throughout their career, contractors are exposed to a lot of opportunities to develop their skills and build on their experience in their area of expertise.
  

When you get into contracting, it can get stressful when your project end date is just around the corner and you haven't secured your next role. This amps up even more once you finish a contract and you're looking for your next gig.

As a specialist contractor accounting business founded by contractors, one of the key questions we get asked is about where to find roles. So, we decided to compile a list of some of the best contractor job portals, platforms, recruiters and consultancies.

If you have anything else to add then please let us know at info@goforma.com.

• What is IR35
• Who IR35 impacts
• Planning for IR35
• IR35 Action Plan

Contractors can be self-employed, a worker or an employee. Those who are employed through an umbrella company or an agency could be considered a worker or an employee.

If a contractor is a sole trader or runs a limited company, he or she will then be considered a self-employed person.

Contractors can be self-employed, a worker or an employee. Those who are employed through an umbrella company or an agency could be considered a worker or an employee.

If a contractor is a sole trader or runs a limited company, he or she will then be considered a self-employed person.

There are different types of contractor jobs available across diverse sectors. Contractors may be hired to perform services such as:

• Marketing
• IT maintenance and support
• Graphic design
• Recruitment
• Business development
• Catering
• Construction work

IR35 is a piece of legislation which allows HMRC to treat private contractors as if they were employees.

It was introduced to combat the problem of "disguised employment", where employees offer their services via limited companies to pay less tax and National Insurance.

As a contractor, there are various key aspects you need to understand about IR35. These are:

• What you need to do to structure your contracts and working arrangements such that they fall outside of IR5
• April 2020-2021 IR35 reform
• FAQs relating to the IR35 reform, and what you can do to prepare for the upcoming changes
  

We've elaborated on these points in detail in our IR35 guide.

Currently, in the private sector, the responsibility for IR35 lies with the contractor themselves. In the public sector however the hiring organisation will need to determine the IR35 status of the contractor before the work begins. Changes to the current IR35 legislation proposed for April 2021 will see this also apply to most hirers in the private sector too.

The IR35 private sector reforms will take effect from April 2021.

An independent contractor is an individual who is engaged in a work agreement with a company or entity as a non-employee.

Factors that identify an independent contractor are:

• They have a greater degree of control over their work
• They offer a special skill set
• They are able to get a replacement
• They aren't entitled to employment benefits

IR35 is a piece of legislation which allows HMRC to treat private contractors as if they were employees.

It was introduced to combat the problem of "disguised employment", where employees offer their services via limited companies to pay less tax and National Insurance.

Will it affect me?

IR35 is usually a threat to your income only if you are self-employed, and provide your services via a limited company.

HMRC may decide that you should, in fact, be paying tax and NI contributions as if you were an employee.

What would that mean?

If your contract is found to fall within IR35, then the difference in take-home pay usually amounts to around 20%.

But that's not all.

HMRC may choose to investigate previous contracts going back at least 6 years to see if they should also have come under IR35. So this could mean a higher tax bill and a bulk payment for previous unpaid tax, plus penalties and interest.

What do I need to do?

You need to structure your contracts and working arrangements in such a way that they fall outside IR35.

Your objective is to stop any enquiry by HMRC before it has a chance to get off the ground. This is usually not that difficult to do, but the process is technical and a bit complicated.

If you are a legitimate contractor trying to make your way through a busy year without falling foul of HMRC's complicated IR35 legislation and obscure assessment process there is a clear and straightforward action plan below.

• What is a contractor
• Types of contractors
• Contractor business structures
• Contractor accounting
• Understanding IR35
• Contractor insurance
• Banking for contractors

A contractor is a professional that provides skills and services to a specific client under set terms. The terms can be for a set number of hours, a certain time frame or duration of a project.

A contractor is responsible for their own dealings and has discretion over the work they carry out.