Are you affected by IR35?
From its inception in 2000, IR35 legislation has undergone changes to its application. These changes were first seen in the public sector in 2017, and in late 2019, draft legislation was published for similar reforms to the private sector and are due to come into force on the 6th April 2020.
As a limited company director, you’re likely all too familiar with the reforms and you may have been wondering how they may affect the status of your future contracts come April.
Are you affected by the IR35 reforms?
On assignments that have historically been deemed outside IR35, you may have been briefed by your client in anticipation of the reforms that your contract will be classed inside IR35 in the new tax year.
This change translates to you no longer having the same access to the tax breaks you enjoyed as a contractor not caught by IR35. This is not a cause for concern – and you should remember that it is not a reason to end your contracting career.
Have you had a chance to consider your options – not only for the interim, but long-term?
By making your limited company dormant and simultaneously carrying out assignments as an employee of an umbrella company, you are no longer constrained by IR35 and you have the added benefit of easily resuming trade through your intermediary again in the future.
A dormant company is simply one which has been registered with Companies House but is not actively trading or receiving any form of income.
Should you make your limited company dormant?
Should you decide to shelve your limited company and work as an umbrella employee, you have the reassurance of operating compliantly while inside IR35, and picking up where you left off should you find an assignment outside IR35 down the line..
It’s important to remember that if a dormant company participates in any kind of trading activity or generates income, it will forgo its inactive status.