IR35
AM Limited ("AML") ensure that fully IR35 compliant contracts negotiations are carried out to ensure that employees are not caught by IR35 legislation. AML’s business model is IR35 and s660 compliant. It is endorsed by leading Tax Counsel, has been fully disclosed and registered with the HMRC (with a Scheme Registration Number) and is registered for PAYE. All aspects of the AML Scheme have also been verified by leading Employment Counsel. IR35 is a term used to denote United Kingdom tax legislation designed to tax "disguised employment" at a rate similar to employment. In this context "disguised employee" means a worker who receives payments from a client via an intermediary and whose relationship with their client is such that, had they been paid directly, they would be an employee of the client. Before IR35 was introduced workers who owned their own companies were allowed to receive payments from clients direct to the company and to use the company revenue as would any small company. Company profits could be distributed as dividends, which are not subject to National Insurance payments. Workers could also save tax by splitting ownership of the company with family members in order to place income in lower tax bands. (This latter practice came under separate, ultimately unsuccessful attack in 2007, see S660A.) AML has rigorous measures in place to ensure that Contractors or Agencies are not caught by IR35 legislation.
IR35 Background
The Intermediaries legislation was introduced on 6th April 2000. It was first proposed by the Chancellor in the 1999 Budget and details were given in the Budget press release numbered IR35. Following extensive consultation, revised proposals were announced in a new press release dated 23 September 1999. However, the legislation is now commonly referred to as 'IR35'.The aim of the legislation is to eliminate the avoidance of tax and National Insurance Contributions (NICs) through the use of intermediaries, such as service companies or partnerships, in circumstances where an individual worker would otherwise -
- For tax purposes, be regarded as an employee of the client; and
- For NICs purposes, be regarded as employed in employed earner's employment by the client.
Prior to the introduction of the legislation, an individual could avoid being taxed as an employee on payments for services and paying Class 1 NIC by providing those services through an intermediary. The worker could take the money out of the intermediary, normally a service company, in the form of dividends instead of salary. As dividends are not liable to NICs, the use of a dividend remuneration strategy results in the worker paying less in NICs than either a conventional employee or a self-employed person. And PAYE would not apply to the dividends.
The legislation ensures that, if the relationship between the worker and the client would have been one of employment had it not been for an intermediary, such as a service company or a partnership, the worker pays broadly tax and NICs on a basis which is fair in relation to what an employee of the client would pay.
Leading Tax & Employment counsel have verified that AML's employees are outside the IR35 legislation as they are employed under a contract of employment and are not claiming to be self employed or in business in their own right.
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