IR35 Accountants
Many freelance contractors find IR35 rules confusing, and even downright scary.
At 1stContact, our IR35 Accountants are experts at unpacking the confusion and
helping
you understand how IR35 rules and legislation impacts on your contracting work.
Ours is an accounting service geared towards
limiting your tax liability while keeping you within the realms
of compliance.
IR35 and Managed Service Company
IR35 rules came into effect from 6 April 2000 - It is a fundamental issue which
you will need to consider at the very start of your contracting career and every
time you accept a contract.
The IR35 rules seek to determine the circumstances under which a contractor should
be treated as ‘self employed’ or ‘employed’ for tax purposes. If deemed ‘outside’
of IR35, a contractor is viewed as self employed and can be subject
to business levels of tax. If ‘inside’ IR35, they should pay
employee levels of tax which can be considerably higher.
IR35 Contract Guidelines
Below are some recommended guidelines for what you should include in your contract:
- The contract is to be made out to the Limited Company not to an individual
.
- The contract is signed by the Director or authorised representative
of the company.
- There is an end date and / or information explaining the
termination clauses.
- The contract has a substitution clause. This allows the company
to send any approved consultant representing it to do the work – it does not have
to be the director / person who signs the contract. (This is very important
with regards to IR35.)
- Limited Company is solely responsible
for paying all of the correct taxes.
- There are clauses relating to liability and the responsibility
for the company to provide the necessary insurances.
- There are clauses relating to the possibility of the company having to provide
its own equipment.
(If you would like to find out if your contract is compliant please contact a solicitor.)
Managed Service Company (MSC) Requirements
In order for a company to be considered as an MSC or Managed Service Company, the
following MSC requirements must be met:
MSC Requirement 1- The company’s business must consist wholly or
mainly of providing directly or indirectly services of an individual to third party
clients.
MSC Requirement 2- The individual supplying their services to the
third party client receives payments from the service company equal to the greater
part of the sums received by the service company from the client for the services
provided by the worker.
MSC Requirement 3 - The payments received by the worker are greater
than they would have received if all of the payments were treated as employment
income of the worker relating to an employment with the service company.
MSC Requirement 4 - For this condition to be met there must be
person termed an “MSC Provider”, and that person must be involved with the company.
To be an MSC Provider a person must be carrying on a business of promoting or facilitating
the use of companies to provide the services of individuals.
Source: (http://www.hmrc.gov.uk/employment-status/msc-guidance-july07.pdf)
1st Contact Accounting and Managed Service Company Legislation:
The July 2007 HMRC guidance notes state that a firm
of accountants carrying on business as accountants, are not caught by the
legislation as they fall outside the definition of an MSC Provider.
1st Contact Accounting is regulated by the Institute of Chartered Accountants of
England & Wales and recently instructed Tax Counsel, Rupert Baldry of Pump Court
Tax Chambers, to give an opinion in the matter of managed service companies and
1st Contact Accounting. Mr Baldry is a highly respected Tax Counsel who was selected
by HM Revenue & Customs to represent them in the House of Lords in the recent Arctic
Systems case.
Mr Baldry’s opinion of 1st Contact Accounting’s current business and processes is
that they should fall within this accountancy
exemption.
Complementary Limited Company Services
Contact us today about
contractor accounting services.