Consultancy agreement

If you provide your personal services to your customers through an intermediary, e.g. a company in which you own or control 5% or more of its ordinary share capital, IR35 applies where you would be considered an employee if you worked for your customer direct. An agreement which sets out the terms and conditions of your work can be evidence that IR35 should not apply.

Services provided through an indermediary

Some businesses and organisations will only deal with freelancers who operate through a limited company as an intermediary. If the businesses or organisation is small, broadly that means that it’s not defined as medium sized or large by the Companies Act 2006, it will be the service provider’s responsibilty to determine if IR35 applies to work they do for their customer. If it does, the service provider’s intermediary must account for PAYE tax and NI as if the sums paid for the work were earnings from employment.

If IR35 is to be avoided a contract for services which is consistent with freelance (self-employed) work should be in place between the intermediary and the business or organisation receiving the services (the client). The agreement should state the terms and conditions of work consistent with self-employment, such as the right to provide a substitute. The contract should reflect the actual terms and conditions in practice.