IR35 in 2021/22: Why you could be better off without a limited company
Are you a contractor? Do you plan on working through your own limited company in the 2021/22 tax year? New IR35 rules could mean that it’s time to rethink the limited way of working.
In case you haven’t heard, there’s been some big changes to the way IR35 rules are applied to contractors working with large and medium sized businesses.
IR35 rules are designed to stop so-called ‘disguised employees’ from working as contractors and paying less tax. The rules have been in place for more than two decades but now, for the first time, private sector engagers will be responsible for judging a contractor’s IR35 status.
This is likely to lead to many more ‘inside IR35’ judgements and many contractors paying more in tax and National Insurance, without enjoying any of the additional benefits of employment.
For some contractors, it might be better to ditch the limited company model altogether and move to another way of working like using an umbrella company.
Using an umbrella company like our sister company means that you will pay the same level of tax as an inside IR35 contractor, but you’ll enjoy more of the benefits of employment like holiday and sick pay.
For more information about umbrella company working, speak to a member of the team today. Call: 0808 281 0303.
Five signs you should ditch your limited company
If one or more of these apply to you, you may want to take professional advice on closing your limited company. One of our accountants and IR35 experts will be able to advise you on the best course of action. Call: 0808 281 0303.
1. Your client has said you’ll be ‘inside IR35’
If one client thinks that your job falls ‘inside IR35’ then there’s a very high chance that other clients will mark you down as a ‘disguised employee’ as well.
2. Your client controls how you work
If your client has a high degree of supervision, direction and control over what, how, when and where you complete your work, then you’re likely to be judged ‘inside IR35’ now and in the future.
3. You can’t send someone to work in your place
Most contractors are recruited because they are very talented. Unfortunately, if this means you can’t send someone to work in your place, then you are more likely to be ‘inside IR35’.
4. Your client is obliged to offer you work and you are obliged to accept it
The ‘mutuality of obligation’ principle is a hallmark of employer-employee relationships. If this applies to you then you’re likely to be caught out by disguised employment rules.
5. It costs more to run your limited company than you get back in tax savings
Once the tax benefits of working on ‘outside IR35’ contracts are taken away, operating through a limited company can be expensive. Looking after your accounts also takes a lot of time and effort, which you can spend more productively if you work through an umbrella company.
For more information about IR35 and how it might affect you, speak to a member of the CloudAccountant.co.uk team today. Call: 0808 281 0303.