{"id":432,"date":"2025-06-27T10:35:06","date_gmt":"2025-06-27T10:35:06","guid":{"rendered":"https:\/\/www.taxpartnersuk.com\/blog\/?p=432"},"modified":"2025-06-27T10:37:22","modified_gmt":"2025-06-27T10:37:22","slug":"intermediaries-legislation-ir35","status":"publish","type":"post","link":"https:\/\/www.taxpartnersuk.com\/blog\/intermediaries-legislation-ir35\/","title":{"rendered":"Intermediaries Legislation \u2013 IR35"},"content":{"rendered":"<p>Until the Intermediaries Legislation (IR35) was introduced in 2000 individuals could avoid paying PAYE and Class 1 NIC by providing their services through an intermediary, normally a Personal Service Company (PSC). Typically the PSC would invoice the client for the services provided by the individual and would receive payments from the client. The individual would then draw dividends from the PSC instead of salary, in the process avoiding PAYE and NIC liabilities altogether.<br \/>\nIR35 applies to engagements where:<\/p>\n<ul>\n<li>the individual personally performs services for another person (the client);<\/li>\n<li>the services are provided not directly but through an intermediary;<\/li>\n<li>the circumstances are such that, if you the individual had provided the services directly to the client under a contract, the individual would have been regarded for income tax purposes as an employee of the client and\/or, for NICs purposes, as employed by the client, and<\/li>\n<li>The individual must receive or has a right to receive a payment or benefit that is not employment income<\/li>\n<\/ul>\n<p>The director and owner of the PSC is the person who must decide whether a particular engagement falls within the IR35 legislation. Where it does the intermediary is responsible for calculating the amount of the \u2018IR35 Deemed Payment\u2019 on which PAYE and NIC become payable. The deemed payment includes all payments and benefits received by the intermediary after deducting a limited allowance for expenses and capital allowances, pension contributions and employer NICs.<br \/>\nIn deciding whether IR35 applies (and therefore if it is a case of employment or self-employment) the \u2018safest starting point\u2019 has long been a decided case known as the Ready Mixed Concrete case of 1968 where McKenna J set out the following crucial components to constitute a contract of employment:<\/p>\n<p>    <em>\u201c(i) The servant agrees that in consideration of a wage or other remuneration he will provide his own work and skill in the performance of some service for his  master <strong>(Substitution)<\/strong><\/em><\/p>\n<p>    <em>(ii) He agrees, expressly or impliedly, that in the performance of that service he will be subject to the  other\u2019s control in a sufficient degree to make that other master <strong>(Control)<\/strong><\/em><\/p>\n<p>    <em> (iii) The other provisions of the contract are consistent with its being a contract  of service.\u201d <strong>(Mutuality of  obligations)<\/strong><\/em><\/p>\n<p>So, in order to constitute a valid contract of employment, all the above three components must exist in a contract.<\/p>\n<p>Going by various decided cases<strong> mutuality of obligations<\/strong> is generally considered to exist where there was an obligation to offer and an obligation to accept future work. In a major blow to HMRC\u2019s efforts to enforce the IR35 legislation a First-tier Tribunal earlier this month decided that Mutuality of Obligations did not exist in a case where the contractor engineer (Mark Fitzpatrick) used his limited company MBF Design Services to provide services to Airbus. The lack of \u2018mutuality of obligation\u2019 stemmed from the fact that Airbus could cancel MBF&#8217;s contract without notice. Further, there were occasions when due to computer failure contractors were sent home without pay whereas employees had to remain on-site.<\/p>\n<p>Given the growing discontentment with this legislation it is likely that the government will review this legislation in its 2011 budget.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Until the Intermediaries Legislation (IR35) was introduced in 2000 individuals could avoid paying PAYE and Class 1 NIC by providing their services through an intermediary, normally a Personal Service Company (PSC). Typically the PSC would invoice the client for the services provided by the individual and would receive payments from the client. The individual would [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[56],"tags":[],"class_list":["post-432","post","type-post","status-publish","format-standard","hentry","category-news"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Intermediaries Legislation \u2013 IR35 - Beyond Compliance: Technical &amp; Advisory Insights<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.taxpartnersuk.com\/blog\/intermediaries-legislation-ir35\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Intermediaries Legislation \u2013 IR35 - Beyond Compliance: Technical &amp; Advisory Insights\" \/>\n<meta property=\"og:description\" content=\"Until the Intermediaries Legislation (IR35) was introduced in 2000 individuals could avoid paying PAYE and Class 1 NIC by providing their services through an intermediary, normally a Personal Service Company (PSC). 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