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The IR35 rules aim to catch anyone who, by placing an intermediary between himself and his employer, gains some tax (including NIC) advantage.
The example most frequently quoted is the consultant who, rather than working under a direct contract with a customer, contracts his services through his one-man company. Such a company has become known as a personal service company - a company which exists to provide the services of one or more particular individuals. The test for IR35 is whether, ignoring the existence of the company, the contract as it operates between the customer and the consultant is one which would lead to the consultant being classified as an employee of the customer, rather than self-employed. If the answer is that the consultant would, indeed, be classified as an employee, then IR35 applies. If he would be classified as self-employed, it does not.
If you operate your business through a personal service company, IR35 will normally only apply to you if:
Another example is a member of a partnership - self-employed - who is contracted by the partnership to a client under terms that would amount to an employment if the contract had been directly between the partner and the client.
HMRC have in the past quoted the example of a vet in a large veterinary practice who is contracted to work by the local zoo for set hours per week. In this example, it is the services of one particular partner which are contracted, and as such, IR35 would apply.
But if the zoo had instead contracted for the practice to provide any vet of suitable qualification and experience, it is unlikely the contract would be caught by IR35.
Again, there are restrictions on cases where IR35 will apply. For those providing their services through a partnership, the rules will broadly not apply unless: