Are you affected by IR35?
If you are a limited company director, you’re likely quite familiar with IR35 legislation. Whilst IR35 has been around since 2000, changes were made to its application in the public sector in 2017. During summer 2019, draft legislation was also published for similar reforms in the private sector to come into force on the 6th April 2020.
Are off-payroll reforms affecting you?
You may have been informed by your client that your assignment (which up to now has been classed as outside IR35) is going to fall inside IR35 once the April 2020 changes come into effect – or you might be concerned about the status of future contracts after April.
A change from outside IR35 to inside IR35 means that you will no longer have access to the tax benefits afforded to limited company directors. Although this news might not be welcomed, it is certainly not a reason to panic; it doesn’t have to be the end of your contracting career.
Have you had a chance to consider your options – not only for the interim, but long-term?
One such option to consider is keeping your limited company, but making it dormant, while working under an umbrella company so that you can continue to work on assignments inside IR35 as an employee.
A dormant company is 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?
Keeping your limited company dormant while you step away for a while gives you the best of both worlds: you can complete your assignments through an umbrella company without worrying about your IR35 status, and easily resume trading again in the future.
If you shelve your limited company and continue working on assignments that are caught by IR35, you have the benefit of staying entirely compliant on current contracts, as well as having your own intermediary available to resume if you are able to find an assignment that is outside IR35.
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.