Does more self-employment mean more IR35 risk?

The number of self-employed people in the UK increased by 367,000 between 2008 and 2012. This number is sure to have grown further during the last 12 months, but does this rise correspond to more IR35 risk?

Not necessarily… It depends on the business structure used. IR35 is the tax legislation used to catch ‘disguised’ employment. Sole Traders, who register as self-employed and pay tax through an annual self-assessment, will always be outside of IR35. But Limited Companies and Partnerships are a different story, and if you work for yourself through one of these structures it is worth ensuring you are confidently outside IR35.

Whether you’re at risk or not can be tricky to determine but there are some general rules. Essentially, if you meet HMRC’s definition of self-employed and your company or partnership meets certain requirements, you will probably be outside of IR35.

According to HMRC you are ‘probably’ self-employed if you:

• Run your own business and take responsibility for its success or failure
• Have several customers at the same time
• Can decide how, when and where you do your work
• Are free to hire other people to do the work for you or help you at your own expense
• Provide the main items of equipment to do your work.

However, if you answer yes to most of the following questions, you could well be caught by IR35:

• Do you work set hours, or a given number of hours a week or a month?
• Do you have to do the work yourself rather than hire someone else to do the work for you?
• Can someone tell you at any time what to do, when to work or how to do the work?
• Are you paid by the hour, week or month?
• Can you get overtime pay?
• Do you work at the premises of the person you work for, or at a place or places he or she decides?
• Do you generally work for one client at a time, rather than having a number of contracts?

If you have multiple clients you will need to assess each individual contract for IR35 risk.

We are fully versed in the complexities of IR35, so if you are a freelancer or contractor and want to know where you stand, contact us today by email at or call 01494 797 150.

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