News : Businesses must ensure correct IR35 declaration
Hundreds of small and medium businesses across Britain could be inadvertently breaking the law by not doing their IR35 declaration correctly and accidentally breaking the law. Accounting experts have suggested that this mistake could mean the difference between ongoing business and immediate closure, making it essential to understand the regulations and ensure that HM Revenue & Customs have no reason to question a company’s legal compliance.
For contractors who are working for clients through intermediaries, it’s essential to pay close attention to IR35 regulations and ensure legal compliance is held at all times. Those outside of IR35 will be able to rightfully gain lower NI and tax bands, but if an IR35 declaration is incorrect, severe consequences could occur. Working as a true contractor means that the advantages of being an employee should be absent, with individuals not receiving sick pay, annual pay or other benefits. However, in the contractors’ favour is the ability to not be controlled by an employer and to be able to work on their own terms instead of being treated as an employee and, therefore, falling into the area of IR35.
Rachel Whitman, an expert accountant, said: “The lines are extremely fine when it comes to this legislation and extreme care and consideration needs to be taken when creating the contractual agreements between you and your end user.” Ms Whitman added that she hoped the HMRC would bring out clearer instructions in the new tax year, helping contactors to understand the rules and their obligations.