What is IR 35 about?
Budget day 1999 news release IR35 announced the Chancellor's intention to tackle tax and NICs avoidance through the use of intermediaries such as service companies or partnerships.
Intermediaries such as service companies can be set up to provide the services of a single worker to a client in circumstances where, if it were not for the service company, the worker would be an employee of the client. The use of service companies in this way allows the client to make payments to the company rather than the individual, without deducting PAYE or NICs.
The worker can then take the money out of the service company in the form of dividends instead of salary. Dividends are not liable to NICs so the worker will pay less in NICs than either a conventional employee or a self-employed person.
The Chancellor believes that avoidance of PAYE and NICs in this way needs to be tackled in the interests of fairness.
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