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For contractors using the Redego PSC service, you will need to determine whether your weekly / monthly payment will be calculated either Inside or Outside IR35. As each services engagement is different, this decision should be taken on a contract by contract basis and is dependant on the exact nature of the working relationship you have with the end client. For Redego Umbrella contractors, the issue of IR35 does not affect you as your payment is automatically calculated on an ‘Inside IR35’ basis.
IR35 was introduced by the UK Government on 6th April 2000. The aim of the legislation is to eliminate the avoidance of Tax (PAYE) and National Insurance Contributions (NICs) through the use of intermediaries (such as Limited Companies) in circumstances where an individual contractor would otherwise be regarded as an employee of the client for Tax and National Insurance purposes.
The Government felt that certain contractors were not genuinely in business and were avoiding their 'fair share of tax' due to the benefits enjoyed by working through their own Limited Company as their income was distributed in another way rather than under PAYE. The Government tried to redefine them as 'disguised employees' and tax them accordingly. IR35 is about taxing under PAYE the income the contractor receives via his/her own Limited company.
The issue of whether IR35 affects you largely hinges on the question “are you self-employed or employed?”
If you cannot be regarded as an employee of your client, you are entitled to enjoy the full tax benefits of working as a Redego PSC contractor and your weekly / monthly payment will consist of a Salary, Expenses and Dividends. However, if you can be regarded as an employee of your client, although you will still qualify for Redego Accountants to administer your payroll under the Redego PSC service, your weekly/monthly payment will consist of a Salary and Expenses.
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