IR35 is tax legislation introduced in the year 2000 to close a loophole that was allowing lots of contractors and self-employed workers to avoid paying tax and National Insurance Contributions.
IR35 prevents workers from using limited companies or “intermediaries” to reduce their tax and NICs when they should be paying tax as if directly employed. Prior to IR35 it was common for a contract worker to pay themselves using dividends. The IR35 rules stated that if the relationship between the worker and the end client would have normally have been one of direct employment, then the worker should pay tax and NICs like any normal employee. Various tests and questionnaires have been created to determine the relationship between a worker and an end client, although none are conclusive.
All contractors using a BBuffalo umbrella company are genuinely employed by the umbrella company and the contractor’s salary is paid accordingly to what they earn from their clients. The agency/client pays the clients earnings to the umbrella company which then pays the contractor after deducting tax and NICs.
They key points are that with a BBuffalo umbrella company:
Mortgages, pensions and investments for the professional contractor.
