Intermediaries Legislation (IR35) - Working through an intermediary, such as a service company

Consequences/responsibilities for: Worker(s), and Intermediaries

The Intermediaries Legislation (IR35) does not apply to sole traders, or people paid all their wages under PAYE, better known as working for an umbrella company.

Worker(s)

Where you are the director and owner of your own limited company you will in effect be the person who must decide whether a particular engagement falls within the IR35 legislation.

Intermediaries

Where an engagement falls within the legislation, then the intermediary is responsible for calculating the amount of the Deemed Payment. This deemed payment normally arises at 5 April each year. All payments and benefits received by the intermediary from relevant engagements in the tax year must be totalled. The intermediary must operate PAYE and pay Class 1 NICs on all earnings from the engagement (known as a relevant engagement), after deducting a limited allowance for expenses and capital allowances, pension contributions, secondary class 1 NICs, and in-year salary and taxable benefits. The resulting amount will normally be treated as paid at the end of the tax year, and be taxed as a payment chargeable to income tax as employment income and subject to Class 1 NICs.

We would recommend that you obtain a professional opinion about your working practices and contract to help you decide if you are caught by this legislation. Please speak to one of our consultants about companies that supply this service.