IR35 Glossary

 

Agency/Recruitment Agency: the organisation through which the contract is obtained and administered

 

Case Law: refers to law and legislation based and developed using real life cases, as with IR35.

 

CEST: Check Employment Status for Tax, also HMRC’s self assessment tool.

 

Chargeable expenses: expenses that can be charged directly to the client

 

Confirmation of arrangements letter: a written document which confirms the way in which a contractor operates on a day-today basis (working practices) from the end client

 

Control, Substitution and Mutuality of obligation: a set of principles used in the determining of IR35.

 

Compliant Umbrella Company: an umbrella company that claims to conform to HMRC tax regulations by deducting NI and income tax via PAYE.

 

Deemed salary: the payment made by the director of an intermediary company to his/herself that is relative to the payment received by a permanent employee of the same description

 

Disguised employee: a limited company contractor whereby IR35 applies A.K.A being inside IR35

 

Dividends: the payment received by the director(s) and/or shareholder(s) from the company’s profits

 

End user: the hiring company/organisation/client for which the contract is undertaken

 

Friday to Monday phenomenon/Tail End Charlies: contractors who are disguised employees.

 

Genuine contractor: a limited company contractor whereby IR35 does not apply A.K.A being outside IR35.

 

HMRC: Her Majesty’s Revenue & Customs, the UK tax service.

 

Inside IR35: term coined to describe a limited company contractor where IR35 applies A.K.A a disguised employee.

 

Intermediary: an entity that exists as a means of operation between the worker and engager.

 

Intermediaries legislation: a piece of tax legislation implemented to tackle the tax avoidance of limited company contractors who should be classed as, and taxed like, a permanent employee of their end client

 

Liabilities: the amounts of backdated taxes due if caught by the legislation

 

Limited company: a private business where the owners’ debt responsibility is restricted to the amount invested.

 

Limited company contractor: a worker, who is usually one and the same with the Director, who operates on a contract basis through a private business where the owners’ debt responsibility is restricted to the amount invested.

 

Notional contract: or ‘hypothetical contract’ refers to the idea the taxman or investigating person forms in determining a contractor’s relationship with the client.

 

Off payroll workers: those workers at a company that are not on the PAYE payroll. This usually refers to contractors, freelancers and consultants.

 

Outside IR35: term coined to describe a limited company contractor whereby IR35 does not apply A.K.A a genuine contractor.

 

PAYE – Pay as you earn: a method of paying income tax and national insurance contributions via a company payroll.

 

Personal Service Company (PSC): interchangeable with limited company where the contractor pays themselves tax efficiently, through a combination of low salary and high dividends.

 

Public Sector: the part of an economy that is controlled by the government.

 

RTI: Real Time Information – information about tax and other deductions under the PAYE system transmitted to HMRC by the employer every time an employee is paid.

 

Sole trader: a worker who operates a business as an individual and is personally liable for all debts.

 

Status tests: the generally accepted methods of deciding on whether a limited company should be considered a disguised employee or a genuine contractor.

 

Substitute: an alternative worker who undertakes the operation of a contract if required.

 

Working practices: the day-to-day working relationship between the contractor and end client.