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Don’t panic over IR35, experts say

If you’re losing sleep over whether or not your contracts fall under IR35, accountancy experts say you need to take a deep breath and relax before anything.

Contracting offers excellent flexibility in how you work, when, and where, but the downside is that you need to ensure your accountancy and payroll matters are taken care of personally. One of the biggest taxation and accountancy issues that contractors face is the rules covering ‘disguised employment,’ and while countless contractors and freelancers have lost sleep over IR35 issues, experts say that you need to take a step back and get a good view of the entire problem before you take any other action whatsoever.

In general, IR35 rules tend to affect anyone who uses a personal service company or other intermediary to provide services for a client – and since there were some who used a PSC as a method for tax avoidance, the disguised employment rules were put into effect. If, under IR35, you end up being indistinguishable from an employee, your income tax and national insurance payments will be higher.

Experts say that there are other ways to prove that you’re effectively an employee and not actually a contractor, including clients exerting large amounts of control over your working behaviour. If you can only work on one contract at a time, work only at the premises of your client, or on a rigorous schedule set by your client, you may be an employee under the IR35 test – and while that means your tax liabilities go up, you may end up being eligible for overtime pay if you are billed hourly.

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