IR35 and Limited Company Contractors
What does Inside IR35 mean for contractors?
If a contractor is classified as an employee for tax purposes, they are said to be "Inside IR35". They are therefore subject to the same tax and National Insurance contributions as an equivalent employee.
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More detail
An individual who provides services through an intermediary, such as a personal service company (PSC), may be considered an employee for tax purposes under the UK's IR35 legislation, which is known as "inside IR35". This means that for tax purposes only, the contractor will be treated as an employee of the client organisation.
The responsibility for paying tax and National Insurance Contributions (NICs) will depend on the client organisation's size and whether they are public or private. If the original legislation applies, the contractor is responsible for determining the IR35 status and paying the taxes. However, under the more recent rules, the client is responsible for determining the contractor's IR35 status and ensuring that the correct amount of tax is paid.
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