What does it mean to be inside IR35?
To be operating “inside IR35” means that, under the IR35 legislation, the worker is deemed an employee and therefore must pay the same tax as a permanent member of staff. As well as employee’s National Insurance, employer’s NI would also apply.
So how do you know if a worker is operating inside of IR35?
• They work for a business (intermediary or end-client) on a long-term basis, commonly with exclusivity to that business
• The company supplys the worker with equipment/tools to carry out the job
• The worker is receiving employment benefits such as paid leave or sick pay
• The worker is being paid by the hour or day, instead of work output
• They are being supervised, directed and/or controlled by somebody on the client site
If a contract worker falls inside IR35 and is not already being paid under PAYE, the supervising client will need to take action. Each worker must be qualified using the government CEST tool or via a similar digital questionnaire to determine status. Alternatively, the company may decide to hire the worker directly or through an Umbrella company like Futurelink, who will be fully liable to deduct all necessary taxes and provide benefits such as pension, holiday and sick pay.
Check out our Umbrella PAYE section for more information.