IR35 – Freelancers Targeted by Government and what Virtual Assistants need to know
IR35 Virtual Assistants – what freelancers need to know
IR35 is something you’ll have seen bandied about on forums and freelance blogs recently… In fact, we’ve even heard of clients advising one another not to hire a VA “in case you get caught out by IR35”. So what is it? And why does it apply to VAs? Should you be concerned? And what do you need to tell clients who are worried about it?
What is IR35?
Essentially IR35 stems from highly paid IT execs forming a Limited Company to get paid via dividends instead of doing PAYE tax, so not only were they paying less tax overall on their “self-employed” earnings, they were also able to claim expenses of running the company (e.g. mobile phone, car expenses, “business” trips etc) off the top line of their income thereby paying even less tax. HMRC were not impressed and cracked down on it using this piece of legislation called IR 35, which meant they were able to extract the tax the parent company/client should have paid to the employee.
Does IR35 apply to virtual assistants?
In order to prove that people are genuinely self-employed HMRC came up with a series of tests. Just working for multiple clients doesn’t automatically make you exempt from IR35, nor does remote working from home. It centres on the relationship you have with that client and the balance of power within that. So as a VA these things can protect your clients from falling foul of the IR35 legislation:
- You use your own equipment
- You decide what work you do and when, where or how to do it
- You can substitute another worker into the role
- You work for multiple clients
- You decide the rate you charge, and are responsible for the overall success of the business
- Be a sole trader – IR35 only applies to Limited companies
If you are genuinely self-employed, this should not be an issue for you as a virtual assistant. However, if you are working for public sector clients they have been told that they must have proof that IR35 does not apply before working with you, and therefore you may be asked to provide further details about your business and how you operate to them in order to comply.
Annabel Kaye has done a “quacker” of a video explaining it – see below!
Thanks for this information. Very useful to have and to understand IR35.
As we approach April 2020 changes to who must assess for IR35, we are seeing some large corporates simply refuse to contract directly with owner-managed service companies and insist they must go through an ‘umbrella company’ and go on payroll.
They are doing this since they do not want to spend the time on assessments or take the risk of getting them wrong.
How many VAs will be affected is unknown. Not many VAs contract directly with larger corporates.
It is possible that this will create a scare at the lower size of organisation, who are not required to do this, but may not understand.