• Malcolm Swallow

IR35 rules changes

Updated: May 20, 2020

Many people new to Contracting find the IR35 rules difficult to grasp. This is a common situation as the rules are deliberately vague and imprecise.

Broadly they revolve around having only one customer for small companies. Our detailed notes are available for download.

However most small companies decide for themselves that they are outside ir35, and support this by some of the secondary indicators such as control of daily work schedule, relationship with 'employer'. They take this decision due to the tax advantages gained through income drawn mostly as dividends and thereby free of NIC taxes.

We recommend that the annual accounts of small companies resemble those that a small trading company might submit, importantly including a paye-taxed salary  at a reasonable level. We suggest at least monthly £1,500 for anyone, but ideally £2,000 for higher paid contractors. And any opportunities for extra work for other customers, even one-off projects, will help you maintain your outside ir35 status.

Also when claiming expenses from your company these should be at a sensible level for the type of company. For instance if large restaurant bills, especially with generous amounts of alcohol, are claimed as 'meeting expenses' or 'subsistence' HMRC are likely to challenge the accounts by investigating expenses.

Our clients always get knowledgeable support on this tricky topic, and we have a consistent track record of very few enquiries into our clients accounts, but at the end of the day the decisions are yours as it's your company.

AML IR35 notes200303
PDF • 101KB


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