IR35 – All doom and gloom?

IR35 - All doom and gloom?

IR35 is easily one of the most hated pieces of legislation introduced for independent professionals. It’s long been considered a thorn in the side of contractors and consultants. With recent changes to the application of IR35 in the public sector, many consider it a direct attack on their ability to retain profits and grow a business. But is it all doom and gloom for contractors and consultants here on out? We certainly don’t think so.

Currently, in the contracting world, IR35 is often spoken about in panic-stricken voices and considered a point to avoid at all costs. While the new application of IR35 in the public sector will see changes, it certainly won’t bring a stop to the contracting and consultancy industries in either the private or public sector. Neither is it a point of dread if you find yourself with the odd contract within IR35. Equipped with the right knowledge and software, handling IR35 is an easy process that needs not hugely impact your business.

What is IR35?
IR35 can appear to be a complex subject. As a contractor, freelancer or small business, it’s important to have an awareness and understanding of IR35 to ensure that you are paying the correct amount of tax and National Insurance. Take a look at our Introduction to IR35 to see how it can affect you as an independent professional.

IR35 is here to stay

With the recent election results and continued Brexit uncertainties, it seems unlikely that IR35 will face any further application changes anytime soon. Nevertheless, budget announcements over the last few years have shown the Government’s clear intent to clamp down on those who use contracting merely as a tax-avoiding technique. We expect to see more and more of these measures in the future. It seems likely that as we’ve seen IR35’s application in the public sector change, we’ll eventually see similar changes in the private sector.

Does this spell the end for contracting (especially in the public sector)? Definitely not. While having a contract inside IR35 can bring complications, limit claimable expenses and increased tax implications, so long as you’re paying the correct levels of tax and National Insurance, there is nothing wrong with operating inside IR35. For those of us who have made the move to contracting as a lifestyle choice; one that offers more flexibility, reward, work/life balance and access to unique or specialist projects, IR35 is a small change that can easily be managed.

A proactive stance

Here at inniHQ, we always try to take a more proactive and positive stance on developments in our field, rather than embracing a doom and gloom rhetoric. There’s no denying, that for those independent professionals who suddenly find themselves inside IR35, they will likely be facing a change in their tax bill and tax status. However, contracting has never been an avenue for those just wishing to escape taxes and while IR35 will provide changes – there’s still plenty of money to be made in contracting (even within the public sector) as well as a swathe of positive lifestyle changes.

To help you understand the impact of IR35 on your income we’ve created a handy IR35 calculator. Simply enter your day rate to calculate the impact of IR35 on your monthly take home pay.

So, while IR35 is here to stay and yes may result in independent professionals paying more tax, it certainly doesn’t dull any of the pros of contracting and won’t see the industry die a death. Remember, the influence you have when negotiating contracts can concern both your rate and your contractual terms. IR35 shouldn’t be a point that makes you turn down potential clients, contracts and work you’re interested in completing. With inniAccounts it’s easy to manage any contracts you have both inside and outside of IR35.

Inside IR35, a limited company remains the safest and most flexible way to provide services as an independent professional. Continuing to trade as a limited company with no additional intermediaries in the contractual supply chain, means you always remain prepared to accept future contracts irrespective of their IR35 status. We’ll be looking into this topic more in the coming weeks.

How we can help

While the majority of your contracts will still be outside of IR35 you may now find yourself with the odd one or two inside. Should you be in a position where one of yours is there’s no need to panic, features built into our software to support IR35 make running your business and getting paid even easier. You can read more about our new IR35 features here.

Over the next few weeks, we’ll be analysing IR35, breaking down the complex subject into easy to understand manageable pieces. We’ll also be taking a look at how it’s likely to impact the future for independent professionals. Be sure to keep an eye on our blog and twitter feed for regular updates.