The Accountancy | Tax Legislation - ir35 Guidance and Returns

IR35 Guidance and Returns

IR35 Guidance and Returns

IR35 is an important part of tax legislation, mainly applicable to businesses within the construction industry.

It was introduced in April 2000, as a method to combat what is known as “disguised employment”. This is when an individual who is an employee, creates a limited company in order to avoid tax or gain an advantage.

Often this is at the recommendation of their “employer” and can lead to a number of issues for the contracted member of staff. This includes a lack of access to benefits, pensions and perhaps even pensions that relate to their work.

What type of factors do HMRC look at?

When HMRC want to ensure that you are working within the IR35 regulation they consider a number of factors:

  • • Control- whether you are free to work under your own control.
  • • Financial risk- could you face financial loss if a client failed to pay or when you buy office equipment.
  • • Dismissal- if you have a fixed notice period then HMRC could argue that you are being treated as an employee rather than a contractor who could have their contract immediately terminated.
  • • Employee benefits- do you receive holiday pay, sick pay or any other benefits? If you do then this could mean that you are being treated as an employee also.

It is important to remember that whilst the above factors are some of the main considerations, HMRC will take a wider look at a variety of aspects in order to ascertain whether or not you are working within the legislation.


Failure to act in accordance with IR35 can not only end in financial loss, but also a reputational risk for your business. Peak to an expert in IR35 and ensure that you are working legally.