Who determines your ir35 status and who pays employment taxes?

The current tax regime has a new tax law- the IR35. This new legislation deals with taxing self-employed people who work through companies. Knowing your IR35 status and how to comply with the legislation is important, as failure to do so may lead to penalties and financial losses. The IR35 status is determined by the tax authority- in this case, the IRS.

The IR35 rules apply to any company which employs self-employed people who work through companies. Any contractor who works for more than one client at a time will be considered an IR35 self-employed person. Therefore, you must be aware of the key factors that determine your IR35 status and the steps you need to take to comply with the new legislation.


Who is responsible for IR35 Compliance?

Who determines your ir35 status and who pays employment taxes?

Many people and businesses can be liable for employment tax if they employ foreign workers in the UK without the required visa or work permit. To avoid legal issues, your business should take appropriate steps to ensure that all its employees are entitled to work in the country as per law.

If you’re an individual working independently, you will also have to comply with IR35 regulations- even though this may not technically fall within the purview of your job title. On the other hand, company directors and officers must take additional measures to ensure their organisation complies with IR35- otherwise, they could face civil penalties or criminal charges.


Mutuality of Obligation (MOO)

If you are an employee in the UK, your employer is responsible for determining your IR35 status. This means they will need to ascertain if you are considered an employee or self-employed and take the necessary steps to classify you accordingly.

Even if you are classified as an employee, ensure that you keep all relevant records so tax returns can be accurately prepared on your behalf. In addition, the MOO means both of you are jointly and severally liable for employment taxes - meaning that should one party fail to pay their fair share, it could lead to financial chaos for everyone involved.


Part and Parcel of the Organisation

As part and parcel of the organisation, the employer must ensure tax payments are made on your behalf. In addition, if you work as an employee or contractor for a business, you must be registered with HMRC and make sure all taxes are paid on time. If this isn’t done following the law, penalties might be levied.

Apart from tax-related activities, it is also important that employment status is determined by the business you’re working for, not by yourself or your employing individual. Any disputes arising between yourself and your company must be settled through legal channels rather than personal disagreements. Finally, always keep accurate records to avoid any hiccups down the line during tax season.


The Intention of the Two Parties

When it comes to tax status, there is a lot that you need to keep in mind. To help with this, we have put together an IR35 calculator to help you determine your status and pay relevant taxes. If you are self-employed, unfortunately, the burden of employment taxes falls on you. To be clear, the intention of the two parties is key when determining your tax status. Your employer must have had good reason to believe you are not a UK tax resident.


Why is IR35 Compliance important?

It can be confusing and time-consuming to comply with employment tax rules. That’s where IR35 comes in. It determines who is responsible for paying taxes on employee income. If you are self-employed, you must register as the sole trader and pay Self Assessment Taxes on your profits.

However, if you are an employee, your employer needs to register with HMRC as an employer to pay taxes on your behalf. Understandably, this can get pretty tricky, so it is important to clearly understand how IR35 works for you and your boss/employer before getting caught up in any tax drama.


The Key Factors which Determine your IR35 Status

There’s a lot of confusion around the issue of IR35 status, which is why it’s essential to know the key factors which determine your status. Your IR35 status is based on several factors, including your company’s size and how closely it is connected to your business.

The company you work for determines your IR35 status if you’re an employee. However, if you’re self-employed or run your own business, it’s up to you to determine your status. This is a complex and important topic, so be sure to pay attention to the tax implications of any changes which may impact your IR35 status - this includes any expansion or contraction of your business in line with rules around small businesses. In the end, the best way to avoid any confusion or tax headaches is to speak to an accountant or tax lawyer who can help you navigate the tax system.


How to Comply with the IR35 Legislation?

It can be tricky to know your status under the IR35 legislation - that’s where our team comes in. By answering a few simple questions, we can determine whether you’re self-employed or an employee and determine your tax obligations accordingly. If you’re self-employed, make sure to track and report all income and expenses using Schedule C of your Taxes return, if required.

Additionally, you’ll need to pay employment taxes, which vary depending on whether your income falls within the £10,000 salary limit or not. If you’re an employee, your employer is responsible for ensuring your status under IR35 is correct.



You are undoubtedly aware of the employment tax’s new rules as a contractor. If you are self-employed or working through a contractor, you must know your IR35 status and comply with the new rules.

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