IR35

[CallumPerry]

Is anyone able to explain this to me in lamens terms and if it applies to me?
Was told I had to be compliant with ir35 legislation when I asked an agency for their Ltd rates. (I've not long got my licence and I'm still in the process of setting up a Ltd Co).

[mardybum]

Only here for the popcorn

[Maigret]

IR 35 is essentially a Tax question. If your are a salaried driver then the Operator/company pays your tax and they have to pay employee NI as source - PAYE. Clearly this comes out of the drivers pocket not the Operators.The Operator then has to pay Employers NI as well. Hence there is a significant cost to both parties.Although the benefit is a State Pension credit to the employee.

If you set up your own company- let’s say I Drive Ltd - you would invoice the Operator for your services. As you are a sub contractor and not an employee, there is no Emploers NI to pay for the Operator - hence a financial saving. The driver / sub contractor could then in theory take all his profits as dividends at 7% tax ( with the first £2k not subject to tax at all) and not have to pay employee NI.

IR35 basically firms up what a subbie is. If you have your own truck own O Licence and therefore run a business risk, you could likely qualify as a subbie. If you are driving someone else’s truck, on their O Licence, their Insurance at their direction then you are an employee.

Operators can therefore save on Employer NI contributions and the subbie can save on Tax and employee NI. The argument therefore is that the playing field becomes uneven in favour of those bending the system. Hence the IR 35 crackdown.