Working through personal service companies

When the IR35 tax avoidance rules apply

Last year the IR35 rules applying to public sector engagements were reformed, and the results were very unpopular. Following an announcement in the November 2017 Budget, these reforms could soon be extended to the private sector, making it essential for contractors to be clear about their employment status.

The personal service company tax avoidance rules prevent you from saving income tax and national insurance contributions (NICs) by interposing a limited company between you and your ‘employer’ (or client). The rules – known as the ‘IR35 rules’ after the number of the press release in which they were first announced – were introduced in April 2000, and only take effect where you would be treated as an employee if you worked directly for the client under the same terms.