IR35 was introduced in April 2000 by the UK Government's Tax Authority (Revenue) which many saw as a means of the Revenue gaining additional taxation. The Revenue claimed that many "contractors" were really employees of their end customer and were not self employed at all. Previously to this many self employed persons were at liberty to use local limited companies to provide their services. The self employed person then drew a salary from his company and paid himself the profits earned as dividends.
Dividends are taxed again if the contractor is a shareholder of the company. It was however possible that individuals running their own contractor company could avoid being taxed as employees altogether. he HM RC have suffered several defeats in court over IR 35, the most notable cases being engineering contractor and PCG member Mark Fitzpatrick and IT contractor Elaine Richardson. Elaine battled with HMRC for over five years over its claim for more than £50,000. A tax tribunal ruled that her contractor limited company, ECR Consulting, “is a genuine business and therefore not the target of the IR35 legislation”.
The actual rules for IR35 have been legally difficult to define and in fact the Revenue has quite a poor record in Court at enforcing it. Not everyone can comply with IR 35 regulations but we at Keylink Consultancy LLC can draw upon expertise and explain the options available.
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