CPM Services - IR35
IR35 is a common name given to the tax legislation that requires all contracts to be treated as if the worker is an employee, unless the contract concerned can meet the cumbersome self-employment rules. The requirement is for each contract and is not based on tax years. So if you work on 6 contracts a year, each one will have to be assessed separately.
CPM will treat each contractor on the basis of their employment status. What this means is that we will continue to use our own approved assessment procedures to determine whether a contractor is self employed. The basic requirements are that you should already be registered as self-employed with the Inland Revenue and that a suitable advisor is engaged in sorting out your tax affairs. CPM considers all Members of the Chartered Association of Certified Accountants and the Institute of Chartered Accountants in England and Wales, Scotland and Ireland and the Institute of Taxation who are in practice as suitable advisers.
Self employment registration isn't an end in itself and your contract may be outside IR34 if it is deemed a self employment contract. Some of the criteria for self employment include the element of risk taken, the ability to substitute someone else and the absence of close supervision by the client.
Because of the strict IR35 criteria for self-employment, many contracts will be classified as 'employed' contracts. For this reason CPM has introduced its own in-house benefit schemes to match that of any blue chip company. Contractors can select from a range of benefits ranging from company cars, pensions and healthcare to relieve the tax burdens imposed by IR35.
By selecting an employee benefit, you will be receiving a higher than normal allowance for expenses. CPM, being an administrative company, is able to make these claims as part of its operations, something which a single contractor alone would be unable to justify. The provision of employee pensions is an implicitly allowed expenditure within the proposed IR35 legislation. Other benefits such as company cars are assessed to tax on a strict formula. Coupled with the advantages of not having to administer the benefit yourself, a contractor can make some savings in both the tax and National Insurance areas.
Section 660
With the Inland Revenue not wining many of its IR35
challenges in court, the case of a contractor using
a one-man limited company has been highlighted recently.
The Inland Revenue has challenged the contractor on
the basis of the settlement rules, rather than the usual
income tax rules. A settlement is created if one's right
to income is transferred to another person. Splitting
dividends between a husband and a wife is considered
creating a settlement by the Inland Revenue and this
has been challenged in the courts. Read
a section 660 article contributed by CPM staff.
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