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Freelance Trainers and IR35?


I have been following some of the IR35 debates but must confess to being a little confused about my position. After seeking help from my accountant and the IR web pages I do not seem to be any the wiser, so here is my question:

1. If a freelance trainer operating as a sole trader is booked on a daily basis, but most of his work comes from one source, is there any problem with IR35? From what I have gleaned so far, a sole trader will already be paying Tax and NICs so there isn't a problem.

2. What happens if the freelance trainer is a Ltd company, getting booked on a daily basis but with most of the income coming from one source? Is the problem with IR35 only for those Ltd companys where dividends are used to avoid paying tax/NICs or any Ltd company?

If my questions seem simplistic then forgive me, but I believe that there must be a sraightforward answer in here somewhere...

Thanks in advance.
Graham King

2 Responses

  1. Don’t worry about it!
    Our reading of IR35 is that it makes no difference whether you are a limited company, or a partnership, or a sole trader. It doesn’t even matter if most of your income comes from the clinet or only a minority of it. You can still be caught, depending on the actual nature of the contract and its terms. The rules the Revenue will follow are largely arbitrary.

    And by the way, the Class 4 & 2 NICs you’re making as a sole trader are nowhere near as lucrative to the Revenue as the Class 1 Employer and Employee rates they’d like to generate by classing you as an employee!

    But consider why you are in business. Presumably, it is to work as much as possible and maximise your income, yes? If so, what effect will IR35 have upon how you achieve that? None, I would suggest. I vote we all just get on and keep busy, and let the accountants all sort this one out afterwards.

  2. IR35

    PMSL use freelance consultants who are hired on a daily basis and so IR35 is of interest to us. It seems ridiculous to us and those freelancers, that we should become their employer, especially as they are running businesses of their own.

    After talking to our accountants, it would seem that the only reason for introducing this is so that the Government can get more money by forcing companies like us to pay employers national insurance for our freelancers. A nice little earner for them, and incidently a very effective way of stifling new businesses.

    Apparently each case will be assessed on its merits and it will depend hugely on the whims and attitudes of the individual tax officers. Criteria will include – does the freelancer invoice the organisations they work for and give them credit, eg 30 days to pay. This implies it is a business transaction rather than an employment transaction, as staff would not give employers 30 days to pay their salary.

    Good luck



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