Yours responsibility to inform Spondoo about your IR35 contracts and why – when contracting via your limited company

If you are a contractor, you have no doubt heard of IR35 and like interacting with it in some shape or form. Based on the type of scenario you are engaged in you will have different bookkeeping as well as reporting obligations with HM Revenue & Customs, so this page attempts to explain the reasoning and triggers where you and why you need to let your Spondoo Accountant about the IR35 status of your particular contract

Where your client is Medium to Large Businesses and the entire Public Sector, and the contractual relationship falls within IR35

If your client falls into this category, it is likely they are going to withhold tax and national insurance from the payments to your limited company, as the IR35 obligation falls on them as the party engaging your services.

Your obligations in this situation

Payslips – make sure you get hold of your payslips for all payments you receive and ensure the following:

• All shortfalls on payments of your invoices directly match the tax and national insurance on the payslip
• Your payslip is in your personal name
• Your information your Spondoo Accountant or Bookkeeper of the situation, ensuring they are aware of the contract, as well as where to find your payslip and invoices

Assess your IR35 – although the obligations fall onto the client it is still important to know your IR35 situation to make sure you are not being forced to overpay tax and national insurance. If you think you are it is important to challenge the IR35 status of the contract before you commence the engagement.

Reasons obligations in this situation

Bookkeeping – your bookkeeping needs to be set up differently to account for this withheld tax and national insurance. Spondoo support can help you if you do the bookkeeping yourself in QuickBooks, Xero, Zoho Books, Sage and FreeAgent  – if Spondoo does the bookkeeping we will need to set this up.

Taking Money from the business – you will be able to take the monies out of the business free of tax and national insurance, so you should separate these funds from the other non-IR35 revenue in the business and not pass them through payroll.

Where your client is Small Business, and the contractual relationship falls within IR35

If your client falls into this category, the IR35 obligation and liabilities fall on you as the contractor. Unsurprisingly, it is therefore unlikely that your client is going to withhold any tax or national insurance from your invoices.

Your obligations in this situation

Assess your IR35 – when your client is a small business the IR35 obligations and liabilities for you and your business as the contractor, it is therefore obvious that you need to assess the status of each contract you take on. If you believe your contract might fall under IR35 you need to inform your Spondoo Accountant and Bookkeeper when starting the contract.

Reasons obligations in this situation

Bookkeeping – your records need to separate these contracts from your IR35 income with larger businesses, as well as your non-IR35 income.

Taking Money from the business – the way you do this will impact these contracts as there is an important concept of Deemed Employment Income where:

• Spondoo will need to assist you with a complex calculation. This will restrict the income that you can legitimately classify as dividends throughout the year, so it is important to know this at the start of the contract.
• Our payroll team will need to submit a year-end calculation or EYU submission to report this Deemed Employment Income amounts to HMRC

Where your contract is outside of IR35

Your normal practising will resume for contracts outside IR35, but we suggest that you don’t entirely forget about this law.

Your obligations in this situation

Assess your IR35 – the IR35 status of your contract could change based on the reality of the scenario at hand, so it is important to keep assessing the status of each particular contract and inform Spondoo of any concerns.

Some other useful tools you can call upon to support in your IR35 journey

Spondoo Umbrella IR35 – whilst many clients will dictate the Umbrella Company you use, if the time arises you can also use our own Umbrella company when required. You can even use this in short intermittent intervals as and when required.

WhatsApp Line – like all taxes all Spondoo clients can contact us about their IR35 issues over WhatsApp at 447395534661