How Does IR35 Affect You?
If you already have your own limited company where you sub-contract to other companies, and you take only salary from your employer (your limited company) then the chances are that IR35 wouldn't apply to you anyway. The legislation was intended to capture people who take a very small salary from their limited company and top it up with dividends which could be 10x or more of their salary! As National Insurance contributions are not due on dividend payments (regular tax is the same whether it is dividend or salary) the small business operator could potentially save significant amounts of money in National Insurance payments. This arrangement is entirely legal - the vast majority of big company owners and directors get paid in this way, but IR35 isn't targeted at those people.
On the positive side, many contractors have taken their IR35 case to the tax commissioners for review, and despite HMRC claiming that the individual was subject to the punitive IR35 regime the commissioners have disagreed, and come out in the individuals favour. This article on The Register web site details that in the 10 years that IR35 has been operational HMRC have managed to claw back just £9.2m for the treasury in their deemed employee approach to contracting. And considering that this remarkable legislation was introduced with a fanfare by the Chancellor as expected to raise some £200m PER YEAR then it has proved to be yet another a catastrophic failure for government.
Association of Taxation Technicians