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What Is The #IR35 Legislation And How Could It Apply To Your Business and Blogging?

If there’s one thing that wakes entrepreneurs up in a cold sweat in the middle of the night (other than that dream where their high school geography teacher tells them that their business idea is rubbish, and that they’ll never amount to anything and why aren’t they wearing any pants?) it’s the thought of running afoul of HMRC. There’s no denying that going from salaried work, where your tax obligations are deducted on a Pay As You Earn basis to self employment as a freelancer or sole trader or even setting up your own limited company can be a trifle jarring. That’s why we agonise so much over what is and isn’t a business expense, make sure that we keep our income and capital gains tax affairs in order and react to anything in the post with an HMRC logo on it with abject and undiluted terror. Yet, with legislation often in a state of change and flux, it can be hard to keep abreast of new and emerging tax laws and their implications for your business. Take the IR35 legislation which was reformed last year. Like any form of compliance it needs to be taken seriously, but with the average entrepreneur maintaining a decidedly busy schedule they may not have time to fully get to grips with how it affects them. Hopefully the answers to the following questions will be of some help…   How does IR35 apply to my business? IR35 is often referred to as ‘intermediaries legislation’ and applies to your business if you are contracted to work for someone through an intermediary. This means that if you regularly hire contractors as part of your daily operations it is your responsibility to ensure that income tax and national insurance obligations are met on behalf of the contractor by the intermediary. In this instance an intermediary is defined as;

  • Your own company
  • A service or personal service company (not the same as a self employed subcontractor)
  • A partnership with other business interests
  • Working with your own spouse or partner
  • Working for a charity
  If the HMRC has reason to suspect that you are not meeting your obligations under this legislation they may well investigate you. If this happens, it’s crucial that you protect yourself.   What do I do if I’m investigated?   Year on year, it’s worth investing in IR35 insurance. This ensures that your interests will be represented using a top notch legal defense that specialises in tax enquiries. As HMRC can investigate you not just for this last tax year but for several years prior (especially if they suspect that IR35 legislation has been repeatedly and wilfully ignored). You should also join the Federation of Small Businesses as they can also be extremely helpful if you are investigated by HMRC for IR35 or anything else tax related.   What happens  if I am found to be in violation of IR35? You’re won’t be going to prison but you will liable for fines, penalties and backdated tax payments with interest. Needless to say this could cripple your enterprise, which is why it’s so important that you make sure that your business is compliant. Oh, and don’t go thinking that you can just close down your business and set up a new one in a few years. HMRC can still look into your accounts after your company is closed.  ]]>

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