![]() |
Contractor Tax Protection
Tax Liability Cover (TLC35) and IR35 insurance from Qdos Consulting |
There is a considerable difference in the tax and national insurance liabilities of a contractor caught by the IR35 rules, and another who falls outside the IR35 net.
In a nutshell, IR35 was created to clamp down on 'disguised employment', to prevent contractors and others who would typically be viewed as 'employed' by HMRC from being taxed as if they were 'self employed'.
Outside IR35
An IT contractor who works via his own limited company, and whose contracts fall outside IR35, would typically pay himself a small salary (often attracting no PAYE tax, or national insurance liabilities), and derive the most of his income from company dividends.
Inside IR35
On the other hand, an IT contractor whose contracts fall within IR35 will draw down income in the form of a 'deemed payment'. He will have to pay income tax and national insurance contributions on the entire amount.
In addition, people caught by IR35 are granted a 5% expense allowance to cover the costs of running a limited company. They can also claim for standard 'Section 198' expenses such as pension contributions and PI insurance.
All limited company contractors should calculate their corporation tax and VAT liabilities in the normal way, regardless of whether they are caught by IR35 or not.
Significant Difference
There is a large difference in the take-home pay of contractors inside and outside IR35.
For obvious reasons, IT contractors should always seek professional advice before signing a contract, and ensure that both their contracts and their working practices both demonstrate that they fall outside the IR35 net.
We also recommend you read these more in-depth guides to IR35 compliance and determining employment status:
Further Reading
| Our Partners |
|
Parasol PAYE umbrella Award winning service |
|
Contractor Accountants Full Service, Fixed Fee! |
|
Free Umbrella Company Save over £1400 p.a. |
|
ClearSky Accounting From £95 per month |
|
Fixed Fee Accounting Contractor Specialists |
|
Umbrella4Contractors Low fees, same day setup |
|
Free IR35 / Tax Review Call ICS - 0800 195 3750 |
|
Umbrella Co. Solutions Only £19.95 per week |
|
PRINCE2, MSP & M_o_R Maven Training |
| Contractor Insurance |
|
Hiscox Office Insurance Instant Online Quote |
|
IR35 Insurance Essential Protection |
|
Income Protection If you're unable to work |

| Contractor Services |
|
Compare Insurance Deals PI & Business Liability |
|
Contractor Ltd Company Instant online formation |
|
IT Contractor Pensions The last great tax break |
|
Private Medical Insurance Tailored contractor cover |
|
IT Contractor Mortgages Based on hourly rates! |
|
Protect Your Income Get a PHI quote |
|
IT Contractor Life Cover Protect your dependants |
|
Critical Illness Cover Comprehensive cover |
| IT Contractor Guides |
|
Contractor Umbrella Umbrella Co. Guides |
|
Credit Crunch Contractors Recession survival tips |
|
IT Contract Rates Contractor rate guides |
|
IR35 Factors Are you compliant? |
|
What is IR35? Guide to the tax rules |
|
Contractor Expenses What can you claim? |
|
IT Contractor Mortgages Sound mortgage advice |
|
Contractor Insurance Are you covered? |
|
Contractor Banking Choose a bank account |
|
Contractor Life Cover Contractor protection |
|
IR35 Insurance Tax investigation cover |
|
Contractor PI Insurance IT contractor cover |
|
Umbrella Companies Links to key providers |
|
IR35 Compliance Is your contract caught? |
|
Conservatives IR35 The Tory IR35 view |
|
Tories IR35 Conservatives IR35 |
Stay up to date with our RSS feed | Terms of Use | About Us | Directory | Site Map | MSC Legislation | Income Shifting
Copyright © 2006-9, Contract Eye Limited, All Rights Reserved.
UK Contractor Guides, Contractor Accountants, Umbrella Companies, IR35, Insurance, Contractor Mortgages
Design by Blue Egg Web Agency