{"id":3459,"date":"2012-02-15T15:24:58","date_gmt":"2012-02-15T15:24:58","guid":{"rendered":"http:\/\/www.policybee.co.uk\/blog\/?p=3459"},"modified":"2025-07-17T11:59:35","modified_gmt":"2025-07-17T10:59:35","slug":"ir35-how-to-keep-out-of-the-firing-line","status":"publish","type":"post","link":"https:\/\/www.policybee.co.uk\/blog\/ir35-how-to-keep-out-of-the-firing-line","title":{"rendered":"IR35: how to keep out of the line of fire"},"content":{"rendered":"
\n
\"HMRC<\/figure>\n<\/div>\n\n\n

If you\u2019re a self-employed contractor, it\u2019s likely you\u2019re familiar with HMRC\u2019s IR35 legislation<\/a>.<\/p>\n\n\n\n

Here’s a recap. IR35 was implemented almost 12 years ago to put a stop to an increasingly common tax dodge among freelancers. More and more employees were leaving their job, setting up as a limited company (or \u2018personal service company\u2019) and returning to the same role as a contractor.<\/p>\n\n\n\n

Workers liked it because they got to pay less tax. Companies liked it because they avoided some of the risks and obligations of being an employer.<\/p>\n\n\n\n

However, the taxman didn\u2019t like it and pulled the plug \u2013 while simultaneously handing the culprits some pretty hefty bills for unpaid tax.<\/p>\n\n\n\n

So, to avoid headaches and hefty bills of your own, you\u2019ll want to make sure you\u2019re legitimately<\/strong> maximising your take-home pay. To do that, you need to determine whether you\u2019re inside or outside IR35 legislation<\/a>. And more importantly, work out how to stay there.<\/p>\n\n\n\n

<\/p>\n\n\n\n

IR35 in a nutshell<\/strong>:<\/h2>\n\n\n\n

If you\u2019re in ‘deemed employment’, you\u2019re inside<\/strong> IR35 and subject to higher tax.<\/p>\n\n\n\n

If you\u2019re self-employed, you\u2019re outside<\/strong> IR35.<\/p>\n\n\n\n

Contractors operating through umbrella companies effectively become employees paying PAYE and avoid the issue of IR35 altogether.<\/p>\n\n\n\n

Simple enough. However, as a contractor, maintaining the distinction between ’employed’ and ‘self-employed’ is the tricky bit. If HMRC have an inkling that you\u2019re actually a \u2018disguised employee\u2019, it\u2019s possible they\u2019ll investigate you and your business.<\/p>\n\n\n\n

<\/p>\n\n\n\n

Avoidance of doubt<\/strong><\/h2>\n\n\n\n

Demonstrating independence is the key here. You need to show HMRC that you\u2019re a specialist; a business that determines its own methods of work, as it sees fit, under reasonable direction from your client. In other words, very much NOT an employee.<\/p>\n\n\n\n

How do you do that? Thankfully, if you\u2019re a business operating on its own terms, there are some practical ways to show it:<\/p>\n\n\n\n