IR56 Advice
What is IR56?
IR56 provides guidance on the employment status of individuals for tax purposes. It was introduced by HMRC to help determine whether an individual is deemed employed or self employed. This is important as the tax implications are different for both.
Contractors who fall under the ir35 tax rules can receive significantly lower income for contracts. IR35 applies to certain individuals and contracts and the decision is often based in part on whether you are employed or self employed. In the past this has been a grey area and left many cases unresolved.
Employment status is based on the terms of agreement you have with who you work for. It’s not something you can chose however you are responsible for making sure it’s correct. If you are employed then you will answer yes to most of the following questions.
- Are you paid a set wage or salary regularly?
- Do you have a set number of working hours?
- Can you be moved from one task to another by someone else?
- Are you able to receive overtime or bonus payments?
If you answer yes to some of the following questions then you are likely to be self-employed.
- Can you make a loss as well as a profit?
- Can you hire people at your own expense?
- Can you decide where and how to provide the services of the job?
Further information on this and IR56 can be found at the link below:
http://www.hmrc.gov.uk/leaflets/es-fs1.pdf
