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Don’t risk breaking the law by making IR35 declarations right

If you’re a small business owner, you could be at risk for breaking the law – even though that’s not your intention at all – just because you made your IR35 status declarations incorrectly, according to one accountancy expert.

A recently conducted research survey found that the lion’s share of small and medium sized businesses in the UK may be running the risk of being laid low by the legislation, which is used by Her Majesty’s Revenue and Customs in order to determine which tax band in which a given firm belongs. It can be relatively rare that the taxman actually challenges an SME for incorrectly declaring an IR35 status, but with the current legislation guidelines being almost universally criticised for being particularly obtuse and almost needlessly complex.

According to accountancy expert, Rachel Whitman, there’s an incredibly fine line between being at risk for falling within IR35 status even when you’re not. The contractor community has been up in arms over the legislation guidance – or lack thereof – and such strident demand for better guidelines has led Ms Whitman to predict that HMRC will bring forward instructions that are much clearer on managing whether or not your business actually falls within IR35 or not.

One of the best ways to determine for sure if you’re in danger of being classified under IR35 is to consult a skilled and experienced tax expert, Ms Whitman also said. This goes doubly so for contractors or freelancers, especially as HMRC is so concerned with tax avoidance schemes lately.

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