What is IR35?
IR35 is a piece of legislation designed to close a loophole to
prevent workers from setting up a Limited Company in order to pay
less tax.
The specific mischief that the rules are designed to tackle are
situations where an individual supplies services to a client via an
intermediary (usually a Personal Service Company, known as a
'PSC') and, but for the existence of that intermediary,
would be regarded by HMRC as an employee of the client.
How does such an arrangement result in less tax being
paid?
The PSC will have the contract with the client and will invoice
for services provided by an individual to that end client. As the
PSC is not an employee of the client, it is paid gross (without
deduction of any Income Tax or National Insurance). Typically, the
individual supplier of the services will then draw money from the
PSC, in the form of dividends, which are exempt from National
Insurance and which attract a lower rate of Income Tax
