MyPay - UK leading PAYE Umbrella Company for freelance and contractor payroll

IR35

On 9th March 1999, HMRC issued a press release detailing how they were to close the loophole that allowed freelancers and contractors to avoid paying large amounts of tax and national insurance by using a Personal Service Company, Composite Company or Business Partnerships. This press release was called IR35, and the legislation it announced has generally been referred to as IR35 ever since.

Previous to this, intermediaries such as service companies were set up to enable payments made from clients to be paid without deducting PAYE or NIC to the individual. This money was then released from the company to the individual in the form of dividends as opposed to salary, in order to give a higher take home amount.

The government recognised this as being potential tax avoidance due to the tax savings the individual benefitted from by working through a Limited Company/ Personal Service Company, whilst their status was that of someone deemed employed. IR35 was formally introduced in April 2000.

HMRC have clearly defined what a Personal Service Company is and have clarified that any other entities employing the services of individuals who are deemed to be employed are caught by IR35.

If you contract your service to a client and are acting as an employee, you cannot avoid IR35. You can however maximise your take home pay by using an Umbrella Company such as MyPay.

For information on IR56 click here.
For information on MSC legislation click here.

IR35
IR56
Managed Service Company Legislation (MSC)
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