That’s a good question – and a crucial one.
If you meet the criteria for IR 35 then it can make a big difference to the amount of tax you pay.
The basic rule of thumb is – if you behave like an employee then HMRC say you should be taxed like an employee…and if they find you’ve been taxed as self-employed when they consider you an employee then they’ll be looking for back tax with fines attached – something to be avoided at all costs.
So what does it look like to be IR35 compliant?
If you can answer yes to most of these questions then you’re likely to be self-employed:
- can you hire someone else to do the work, or to help you?
- Do you take a commercial risk?
- Do you use your own equipment?
- Do you do the work to a fixed price and take the risk if it takes more or less time?
- Can you decide how to do the job?
- Do you work for different people?
- Do you have to correct work in your own time at your own expense?
But if you answer yes to most of these questions then you’re probably an employee:
- Do you have to do the work yourself?
- Do you have to work to set hours?
- Do you work a set amount of hours?
- Are you paid by the hour, the week or the month?
- Do you get overtime or a bonus?
Once you know if you’re IR35 compliant, then here at Manchester contractor accountants, The Accountancy People, we can help you chose the best company structure for your business – so you pay the right amount of tax and keep HMRC happy.