Despite the title of this video, if you are watching it, it is quite likely that you are a rather articulate person and probably with the high skill level.

However, despite this, like most people facing a change in their working style, they are faced with something that is new.

If the person that you are going to work for ask you to operate through a limited company rather than as an employee or a sole trader, you need to consider very carefully the implications off the provisions off the infamous tax legislation refer to as I are 35.

This video is an attempt to simplify the features off.

I are 35 as a starting point for you to consider if this applies to you.

It is, however, no substitute for detailed advice relating to your specific circumstances.

You should always seek your own professional advice before taking any action.

The background toe I are 35.

Over the years, there's been a growing trend for businesses wanting to avoid having their workforce as employees.

Instead, they have preferred to use the service is of self employed individuals as this reduces the cost to them as they avoid employers.

National insurance.

And it's also avoids many off the legal issues that are related to employment.

That has been a history off hmrc challenging the status of self employed subcontractors.

This pose a significant threat to the businesses that use the service is off such so contractors.

Should they lose the argument with HMRC aboutthe status off the individuals working for them, then they would incur a substantial liability.

But tax and national insurance that should have been payable if they had been treated as employees in the first instance as a consequence of this business is reacted by requiring their subcontractors operate through a company which removed the status threat from them.

It was, as a consequence, off a significant loss of revenue that HMRC faced by this trend, that's I R 35 was introduced status, A central issue that underlies I are 35.

Is the actual status off the workers involved?

Are they really self employed, or are they really employees just pretending to be self employed?

There's no legal definition of what an employee is, but there's a great number of legal cases that have established the criteria that defines status.

There are many factors that it is necessary to consider, but each case has to be taken on its own merits.

No one factor is conclusive in establishing status, as all the relevant factors need to be considered in the round.

The ones that ever status that are definitely employed and the ones that are definitely self employed are usually obvious.

Many, however, fall into the gray area of uncertainty, which lies between these alternatives.

This creates the background of uncertainty that makes I are 35.

Such a problem I are 35 is applicable in all cases where the argument about status would be lost and the worker would be considered unbalanced to be an employee rather than a genuinely self employed person.

When does I are 35?

Apply where the relationship between the worker on the end user is one off employment.

Then the end user takes the risk off the relationship.

If they pretend that the worker is self employed when in reality based upon the facts, they should be employees.

I are 35 applies where an intermediary body, usually a limited company, is introduced into the relationship between the worker on the end user.

The worker operates through the limited company, who in turn invoices the end user off perhaps another body in between, such as an agency autumn umbrella company.

Where such an arrangement exists on the true nature of the relationship is effectively that OVEN employee than I are 35 applies.

What is the effect of I R 35?

Where it applies?

The earnings paid from the end user to the intermediary body must be subject to P A y E.

After a small deduction of 5% and after the deduction of any expenses that any employees would be able to claim.

This compels a significant amount of the income earned to be subject to tax plus employees, National Insurance plus Employers, National Insurance.

This means a substantial amount of tax and national insurance would be payable.

If the provision of I R 35 are ignored and the companies used to pay a minimum salary and dividends to reduce the tax liability, then that is likely to be a big difference between the tax actually paid on the amount of that should have Bean paid hard.

I are 35 been applied as the years go by, this amount gets bigger and bigger.

This puts the company at great risk.

However, if the company fails to pay over the tax and national insurance required by I R 35 then if HMRC find out about the situation, they can go to the end worker and demanded from them.

By the time they do this, the amount due can be considerable.

The end effect is that the risk has been passed from the end user down to the intermediary body and ultimately onto the end worker.

If an intermediary body is introduced in a situation deemed to be akin toe unemployment.

If you're asked to operate through a limited company, you need to be aware off the significant tax cost that you will face do toe.

I are 35 on the substantial risk should you ignore it, as the rescue will face is considerable.

You should always seek professional advice from an accountant who fully understands I are 35 its consequences.

Thus, if you are asked to operate through a limited company, be on your guard, take care on dhe seek advice.

If you think I are 35 might apply to you And you would like to discuss the situation with others.

Police Telephone is on Oh on 2 to 6 to 458 to fall.

We were delighted to speak to you.