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These rules were first proposed in the 1999 Budget news release numbered IR35. They have since become commonly referred to as "IR35". IR35 is a piece of Government "anti-avoidance" Legislation (clauses 71 & 72 of the Welfare Reform & Pensions Bill, 1999) - it became Law on 6th April 2000. The purpose of the rules was to remove opportunities for the avoidance of tax and Class 1 National Insurance Contributions (NIC's) by the use of intermediaries, such as service companies or partnerships, in circumstances where an individual worker would otherwise be an employee of the client or the income would be income from an office held by the worker. Put simply, any Consultant/Contractor, working (after 6th April 2000) on a contract basis, via their own Limited Service Companies, who fail the "Self employed" criterion and are therefore deemed to be in "disguised employment", will after 6th April be ineligible to use the benefits associated by working via a limited company and will have to pay Schedule E income tax and Class 1 NI on the entire amount of money less allowable expenses (i.e. qualifying travelling expenses, employer pension contributions, 5% flat rate of the gross payment for the relevant contract, Employers NIC paid during the year plus any due on the deemed payment) being paid to the Limited company for their services. Click here for further information: http://www.inlandrevenue.gov.uk/ir35/summary.htm
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