To help every contractor understand the upcoming changes to IR35 legislation and how you can avoid getting caught out, in this guide Umbrella Supermarket outlines 6 ways you can avoid IR35 in 2021.
Let’s start by looking at what IR35.
IR35 is a piece of legislation that was introduced in 2000 to stop workers such as contractors from working as ‘disguised employees.’ This was a way of targeting workers that offered their services in a way which allowed them to take advantage of tax benefits enjoyed by the self-employed, but who actually operated more like employees.
Under the legislation, it was the responsibility of the contractor themselves to determine their own IR35 status.
However, this changed when HMRC decided that too many companies were not compliant.
From 2017, it became the responsibility of the client to determine the contractor’s IR35 status in the public sector.
This meant that many public sector contractors were considered inside IR35, regardless of their actual circumstances., and it became the responsibility of the client to deduct the contractor’s tax and National Insurance from their fee before it was paid to them.
The problem lies in the fact that many of these public-sector clients weren’t correct in their IR35 assessments, meaning many contractors paid more in PAYE tax and National Insurance contributions than they needed.
These contractors effectively paid tax as if they are an employee, but didn’t enjoy the benefits of being an employee such as receiving holiday pay, sick leave, maternity/paternity leave and a workplace pension.
The bad news for thousands of self-employed contractors in the private sector is that from April 6th 2021, these rules are set to roll out in the private sector too.
These changes were initially set to come into force from April 2020, but this was postponed due to the COVID-19 pandemic.
From April, it will become the responsibility of private sector clients to establish contractors’ IR35 status. This is set to badly impact the 170,000 limited company contractors out there.
What’s more, if you are caught to be operating as a ‘disguised employee’, you may be subject to a long and expensive IR35 investigation which can incur penalties, stress and hassle.
Clearly, no contractor wants to get caught out by IR35.
To avoid IR35 you must be genuinely operating on your own and double check your contract.
Here are a few things to look out for to determine whether you will be considered as inside or outside IR35 rules:
Contractors are hired to undertake a specific task and should only carry out the work outlined in their contract.
That means the client shouldn’t have the power to move them from task to task or be able to tell the contractor how to complete their work as an employer would. This also means there should be no specific working hours or days outlined in the contract as this may imply to HMRC that you work more like an employee than contractor.
Mutuality of obligation is a working relationship where an employee takes on any work their employer gives them.
If you want the contract to remain outside or IR35, you must be able to ensure that it lets you refuse work and grants freedoms, such as taking on other projects at the same time.
If the client does offer you more work that is fine, but you will need to have a new contract drawn up and it should be treated separately.
If you can’t undertake the contract at hand for any reason, as a contractor you are allowed to bring in a substitute to do the work for you.
A right to substitution clause in the contract clearly indicates that you really are a contractor and therefore this should be clearly stated.
Exclusivity clauses are typical of employment contracts, however this shouldn’t be the case for contractors.
A contract that stops the contractor from working with other clients whilst undertaking the role at hand can raise red flags to HMRC.
Make sure you always work as a contractor offering business to business services and aren’t named personally in the contract itself or in any correspondences relating it to.
The final way you can avoid IR35 is by going umbrella.
An umbrella company will employ the contractor, thereby giving them statutory rights like holiday pay, sick leave, maternity and paternity leave and a workplace pension. The company will invoice the client on the contractor’s behalf and pay them a salary, processing their tax and National Insurance contributions through PAYE.
As the umbrella’s employee, you will be automatically exempt from IR35. This is great news for contractors, meaning they don’t need to worry about getting caught up in complications.
If you think this will be the easiest route for you following changes to IR35 later this year, the next step is to find the best umbrella company for you. That’s where Umbrella Supermarket’s umbrella calculator comes in handy.
Simply enter a few key details, such as your contractor rate and preferences, and our handy contractor calculator will generate a list of the best-suited umbrella companies for your needs.
We make it quick and easy to find the perfect umbrella company, ready to see what we can do for you today?
Any contractor considering switching to an umbrella company will want to know how to find the best provider to work with.
Although you could spend your precious time and energy searching the web for the best umbrella company, there is an easier way – using an umbrella calculator.
In this guide, Umbrella Supermarket explains why every contractor should use an umbrella calculator in 2021.
If you are considering contracting you will need to decide on PAYE or umbrella.
It can be a difficult decision to make and contractors will inevitably be questioning which option will be the best for them.
To help every contractor get on the right track for them, in this guide Umbrella Supermarket looks at PAYE vs umbrella, outlining the key differences and how this will impact you.
There are many reasons that contractors across the UK opt to work under an umbrella company.
Umbrella companies offer an easy way to contract and remove the need for the contractors to worry about the burdens of admin, finances, tax and IR35, all things that limited company contractors have to deal with.
For this reason, many contractors will be weighing up their options and questioning whether it is worth using an umbrella company in 2021. To help make the decision that little bit easier, Umbrella Supermarket has put together this guide on the pros and cons of using an umbrella company.
Any contractor that is considering operating through an umbrella company in 2021 will need to understand Umbrella Company fees - from why an umbrella company charges fees, how they are paid to how much the contractor will pay.
In this guide, Umbrella Supermarket answers those all-important questions to help every contractor know exactly where they stand when it comes to umbrella company fees.
If you’ve made the decision to contract through an umbrella company in 2021, you will next need to find an umbrella company that’s right for you.
After all, there are lots of umbrella companies out there, so how do you know which one to choose?
To help you find the best umbrella company for you, in this guide Umbrella Supermarket outlines what makes a good umbrella company, so you can rest assured you’re making the right move.
One of the many advantages to operating through an umbrella company for contractors is that they become an employee of their chosen provider.
In turn, this means that the contractor will be automatically enrolled onto the umbrella company’s workplace pension scheme.
To help contractors find out more about umbrella company pensions Umbrella Supermarket has put together this handy guide.
If you are considering contracting through an umbrella company you will naturally have questions and queries over how they work.
After all, making the move to umbrella can be a big step for contractors. To help, in this guide Umbrella Supermarket explains how to get started with an umbrella company and share our top tips for using one in 2021.
PAYE or umbrella is a question asked by every contractor. Which one you opt for will have a big impact on your contracting career and lifestyle. So, it's important to make the right decision for you.
To help makes things a little bit easier, Umbrella Supermarket has put together this guide on PAYE or umbrella, outlining the key differences between each, to help you make the best and most informed decision for you.
One of the many benefits to working through an umbrella company is that you will receive holiday pay as well as a range of other statutory benefits including sick pay, maternity and paternity pay.
To find out more about umbrella company holiday pay, and how to calculate how much you will be entitled to, Umbrella Supermarket has put together this handy guide.
Contractors must make several decisions throughout their contracting careers. One big decision contractors have to make is how they will operate.
One way that contractors can work is through an umbrella company.
Umbrella companies have become an increasingly popular way to contract in the past few years, offering many benefits to the contractor. But, how do you know whether this option is right for you?
To help every contractor make the right decision for them, in this guide, Umbrella Supermarket explains when not to use an umbrella company.
There are tons of benefits to using an umbrella company, which is why they have become such a popular option for contractors in recent years.
After all, an umbrella company takes away the stress and hassle of operating through a limited company whilst offering contractors a range of advantages, such as statutory rights, paying them a salary, deducting correct tax levels and National Insurance, and taking care of tasks like expense processing and invoicing.
However, as more and more contractors opt to use the services of an umbrella company, more providers have started to claim that they are HMRC approved.
To bust the myths around HMRC approved umbrella companies and get straight to the facts, in today's guide Umbrella Supermarket look at whether HMRC approved umbrella companies really exist, so you know exactly where you stand.
If you're considering making the leap to contracting, you will understandably want to know how much you will have to pay in umbrella company costs. After all, this amount comes directly out of the contractor’s pocket, so it’s important to be clued up on how much you should expect to pay.
To help contractors, in this guide Umbrella Supermarket answer the all-important question of how umbrella companies cost in 2021.
