What is IR35?

IR35 is the shorthand name for tax rules concerning the provision of personal services through intermediaries.

These rules came into effect on 6 April 2000, but they were significantly amended from 6 April 2017 for contracts involving public sector bodies.

There are now two different applications of IR35 — for the private sector, and for the public sector. HMRC also refers to circumstances which may fall within IR35 as “off-payroll working”.

The Revenue is currently consulting on how to change the way IR35 is applied in the private sector, to align with the public sector rules. These changes are likely to take effect from 6 April 2019, but that commencement date is not certain.

When does IR35 apply?

IR35 may apply when you provide personal services to your customer through an intermediary.

This is usually a company which you control, but the intermediary could be a partnership or another individual acting as an agent. There may be more than one intermediary in the chain between you and your customer, such as one or more employment agencies.

The law requires you to imagine that you are working directly for your customer, ignoring the intermediaries in the chain. Looking at the responsibilities and obligations under the hypothetical contract between you and your customer, would you be classified as an employee of your customer?

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