Does IR35 apply to you? How Will IR35 Affect Online Teachers or Freelancers?


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What is IR35?

IR 35, also called the 'Intermediaries Legislation' is characterized as off-payroll working by HMRC. IR35 is term for the UK tax regulation which is intended to identity contract based workers and businesses which are abstaining from paying the appropriate tax by filling in as 'camouflaged' employees, or are drawing in laborers on an self-employed premise to 'mask' their actual employment status. Introduced in April 2000, IR35 Took its name from the first official statement distributed by Inland Revenue (presently HMRC) declaring its creation.


If  you are working from home as ESL teacher, and wondering if IR35 will affect you. Check details as below


IR35 agenda

To find out if you are inside or outside IR35, you may check the following non-comprehensive IR35 consistence agenda of a portion of the component. As indicated above, you ought to consider getting point by point guidance on your IR35 status including a survey of both your administration contracts and your everyday working practices.



Inside IR35:

  • When you carry out all of the work that your company is contracted to do personally
  • When you work for your own limited company, but receive employment benefits such as paid leave or sick pay
  • When you are being paid on a time basis
  • When you have close supervision by somebody in your client’s business
  • When you are supplied with the equipment by a client and work at their premises
  • When you work for one client long-term
  • When all rejected work is corrected at your client’s cost
  • When you do not have your own business identity


Outside IR35:

  • When you have the right to delegate or substitute work contracted to another person and that right is exercised in practice
  • When you work for your own limited company and do not receive employment benefits such as paid leave or sick pay
  • Being paid on a project basis or at a fixed price
  • When you have the right to decide how and when you work and can send a substitute to do the job if you please
  • When you supply the appropriate equipment and may work from your own premises
  • When you work with more than one client at one time or on short successive projects with a variety of clients
  • When all rejected work is to be corrected at your own cost
  • When you have your own premises, insurance and branding


How does IR35 apply when working outside the UK?

To keep it simple, even if you are working outside of the UK, IR35 can still apply. What is the first step to understanding this question is to clearly outline the differences in the process both before and after the IR35 reform.

Before the IR35 reform: (Part 2, Section 8 of the ITEPA)

Before the reform is in place, the contractor is responsible for the lot! This means that you are responsible for determining your IR35 status and are liable for the payment of any tax or national insurance contributions (NICs). In addition to this, if your IR35 status determination is incorrect, you will also be liable for the payment of any fines, penalties or remaining tax .


Let's start with some questions.

l It is important first to distinguish: Is the contractor a UK taxpayer?

If the answer is no, then IR35 does not apply.

If you’re not a UK taxpayer, it’s important to seek the equivalent legislation that may be in place in your country of residence.

l Secondly, are you working via an umbrella company?

If the answer is yes, then you don’t need to worry too much about IR35. As part of an umbrella company, you will already be taxed as an employee.

After the reform: (Part 2, Section 10 of the ITEPA. Due to arrive in 2021)

Once the reform is enacted, the responsibility for determining IR35 status switches from you, the contractor, to your end client. Liability for payment of tax and national insurance contributions is also no longer your burden - this will fall at the feet of the fee-payer in the engagement.

Now, who exactly are all these people in your contractual chain? Simply put, the fee-payer is usually the agency between you and your end client that makes payment to your Limited Company for your services. If you’re involved in a direct agreement with your end client, i.e. there is no agency, then your end client is the fee-payer as well. Your end client will, therefore, be responsible for not only determining status but also liable for payment of tax and national insurance (now, that’s a busy client).

Agreement examples between the end client and contractor (in IR35 terms)

Let’s keep things easy and focus on a standard arrangement with both an agency and an end client. As we know, the responsibility for determining status lies with the end client. Only if they determine status fairly will the liability for payment of tax and NI pass down the contractual chain to the fee-payer (in this case the agency). If the client shows no reasonable care in assessing IR35 status, then the liability for payment of tax and NI will stay with the client.

If the end client is a small company (as per the Companies Act 2006) then you, the contractor, would be held to the same set of rules as before the reform. These can be found in part 2, section 8 of the ITEPA. I’ll reword that in plain English rather than making you read that riveting chapter of the ITEPA. Put simply; the contractor would be responsible for determining status and liable for payment of tax and NI.

If your end client is entirely offshore and has no connection or branches in the UK then, as above, the old rules will apply. You will, again, be wholly responsible for determining status and liable for tax or NI payments. This is because HMRC can’t pursue offshore companies.

Finally, if your end client is based offshore but has a branch, no matter how small, within the UK then the offshore branch of your end client determines status. In this scenario, the feepayer is liable for payment of tax and NI. If it’s a direct engagement between your limited company and your end client with no agency involved, then the UK branch of your end client is liable for payment of the associated tax and NI.

What happens if you’re paid in foreign currency?

We usually see that, as the contractor, you are responsible for any conversion charges associated with your payment. However, your contract should stipulate exactly how this operates in your engagement. Being paid in a foreign currency won’t affect who is liable for payment of any tax or NI.

We have covered a lot of ground very quickly in this short article so thank you for sticking with me. If you are in any way uncertain of what residency you fall under this can be a complex issue, we suggest you seek professional tax advice.

Although it is currently all quiet on the western front in the contracting world, it’s still important to ensure that you are protected from IR35. Remember, it is still your responsibility to keep updated on your IR35 status until the reform in 2021. The world will need dedicated specialist contractors, so be prepared for when they do.


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