IR35, more properly known as the Intermediaries Legislation, was introduced in early 2000. It was designed to prevent the avoidance of tax and national insurance contributions (NIC) via the use of intermediary companies, by taxing such companies at a rate similar to the tax paid by employed workers.

This law has become rather disliked, particularly by freelancers, who typically take significant risks in their business. If they have a well written conmtract, then it supports them, and highlights their self employed position. However, if it is poorly written, thenit can undermine them and even fall foul of the dreaded IR35.

The easiest way to solve this is to get an expert to review the contract. There are plenty of experienced lawyers who would be willing to look it over, and the average price is just 120. Considering how important it is that you get this right, and what you will be charged if you get it wrong, it's well worth the price.

Before you send it off for review, I'd suggest you check some things yourself, just to see if there's anything that you obviously need to change.

1. Does your company bear the financial risks of failure? [Yes = Good]

2. Will sound management profit your company in performing a contract? [Yes = Good]

3. Does your company have the right to send alternative personnel? [Yes = Good]

4. Will the risk of bad debts be born by your company? [Yes = Good]

5. Is your contract a "Contract for services" rather then a "Service contract"? [Yes = Good]

6. Are you entitled to sick or holiday pay? [No = Good]

7. Are you in a "master and servant" relationship with your client? [No = Good]

8. Do you and your client have mutuality of obligations? [No = Good]

If you are a UK freelancer and all of the above check out in your case, then you might stand a good chance of staying outside IR35. But a word of warning about contracts: It's not just about WHAT is written, but also the WAY it is written. When reviewing contracts, IR35 experts look very closely at wording and phrasing. They know that poor wording can create a chink in your armour that the tax authorities can exploit.

So, the first step in making sure you are completely in the clear with regards to IR35 is to contact an expert reviewer. Get them to take a look at your contract, and sound out anything that might trip you up. Just be sure you get thsi done before you put pen to paper and actually sign it.

Article Source: http://articlecrazy.com

This page was provided by the companies Home Loans Direct, and the Small Business & IR35 Contractor Accountants Antony J. Holdsworth & Co.

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