When you decided to become a contractor you probably thought that life would get simpler…
Less pressure to build a career within one organisation, more flexibility over your working hours, more freedom to pick and choose the work you do.
But then you began to hear about this important piece of legislation – IR35. And suddenly, things became a lot more complex!
If you’re already working as a contractor, then it’s highly likely that you’re familiar with IR35 and know whether you are working ‘inside’ or ‘outside’. (If you don’t, please get in touch, it’s vital that this is clear for you as it will affect your tax liability).
However, if you are taking on a contract role which is subject to IR35, or you anticipate your current role will be classified as ‘inside’ IR35 after April 2020 when the off-payroll reforms are introduced, you will need to know what options are available to you.
Broadly speaking, your options are likely to include:
- Join an Umbrella company – this means you can work compliantly and combine the freedom of being a contractor with the benefit of access to employment rights. It’s important to understand how an Umbrella company works, however, and to know the potential impact on your take-home pay. (Our parent company, JSA Group, provides a highly compliant Umbrella service to thousands of contractors across the UK, please contact us if you would like to explore this working option).
- Challenge the assessment – it may be possible for you to challenge an ‘inside’ IR35 assessment. The right course of action will depend upon your particular circumstances, but a conversation with your end hirer and/or your employment agency to unpick the rationale behind the decision may be a good starting point.
- Negotiate a higher rate with your end hirer – if your role is classified as ‘inside’ IR35, you will need to pay tax and National Insurance like a regular employee, and your end hirer will need to pay Employers’ National Insurance based on your pay. If you continue to operate through your own limited company, it will result in lower take-home pay than you are used to. As a result, you may be able to negotiate an increase in your day rate with your end hirer.
If you anticipate being classed as ‘inside’ IR35, do not to panic! Do not rush into closing your limited company (PSC) without first taking advice.
Everyone’s circumstances are different so it’s important to get input from specialist contractor accountants like ourselves if your IR35 status is likely to be changed.
We can help you understand your IR35 status determination and help you explore the best way to work compliantly.
Please get in touch.
Thinking of switching to Umbrella?
Think you may need to switch to Umbrella?