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Do you require a contractor accountant specialist that provides a comprehensive tax and accounting service?

Do you require a contractor accountant specialist that provides a comprehensive tax and accounting service? We have expert knowledge on all legislation impacting contractors including IR35 and S660a and have been recognised as such by the PCG. We also offer a money back guarantee for our services.

Why not have a look at our Personal Service Company page which explains the key areas that we can support you with?

If you want to organise your companies affairs tax efficiently and need a flexible approach to meetings suit your busy lifestyle then why not contact us to discuss how we can help you. This is our approach to business.

• What is IR35?
• What is S660a?
• Personal Service Companies (PSC)

What is IR35?

The name IR35 refers to legislation that originated from a press release issued in the 1999 budget. This legislation came into force on the 5th of April 2000. The legislation seeks to tax freelance workers as if they were employees. The main aim is to prevent situations where an individual works on a 'disguised employment' basis rather than as a true contractor. The benefit to an individual from setting up a Personal Service Company (PSC) and employing themselves through this company come from tax advantages.

IR35 enables Her Majesty's Revenue and Customs (HMRC) to treat freelancer's income as a salary which means that Pay As You Earn Income Tax (PAYE) and National Insurance Contributions (NIC) are payable on all earned income. The IR35 legislation addressed the following 3 areas:

• When IR35 applies
• The salary requirement when IR35 applies
• What happens when this salary is not paid

The wording of the legislation is very broad and treats many genuine contractors as employees. There is no statutory test for employment versus self-employment which has resulted in much case law and practice.

An IR35 review usually begins as a PAYE/NI audit by HMRC. These would then evolve into a review of IR35 status which would often involve a review of the contract in place.

Sherwin Currid can review your contract and working arrangements and advise on whether IR35 is likely to apply and the action that you need to take to ensure that your affairs are arranged in the most compliant and tax efficient manner.

What is S660a?

S660a is part of what is known as Settlements Legislation. This legislation has been in existence since the 1930's and was established with the aim of preventing someone characterising their own income as someone else's in order to pay less tax on it.

HMRC have been seeking to apply this legislation to contractors when the following traits apply:

• A company which has a high income and relatively low expenses and capital base
• One spouse has a far more active involvement in the business than the other
• The company income is largely derived from the skills of the main shareholder

Many contractors operate in such a manner when they employ their husband or wives in their PSC to obtain the tax benefits from this arrangement.

There has been a substantial challenge to the legality of applying this legislation. Recently, the most notable case concerning this is the Arctic Systems case which HMRC lost. Consequently, this currently should prevent HMRC from applying the legislation in this manner.

The HMRC is now looking at introducing new legislation called Income Shifting to tackle the same area. At Sherwin Currid we keep fully abreast of all changes to the situation for Contractors and are able to advise clients accordingly.

Personal Service Companies (PSCs)

Many consultants and contractors make use of a private limited company as a trading vehicle. This can have significant tax advantages. Find out More...

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