The introduction of the IR35 legislation led many contractors to feel targeted and uncertain with whether they would be seen as a genuine business in the eyes of the Revenue. This fear of becoming a “tax avoider” and having to pay penalties led to the development of umbrella companies which although provide a less risky method of working also delivers a smaller take home pay.
The majority of contractors will find, if properly reviewing their status, that they are better off setting up and running a limited company, where you become a director and shareholder, is the most tax efficient way of working. Operating via a limited company has a number of other advantages as opposed to working under an umbrella company.
Although IR35 becomes a consideration, good business practice is all it takes for compliance:
- Have each contract reviewed by an IR35 professional (QAccounting provide a review service as standard through our compliance partners, Qdos Contractor)
- Review your working practices regularly during your contract, some contract reviews include assessments of your working practices
- Ensure your taxes are paid correctly and on time
Operating under an umbrella company shouldn’t be a long term solution. If you are still trading in such a manner, speak to one of our advisors who will help you review your status and whether this is the most tax efficient option for you.
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