IR35 query

[kir]

I am currently a freelance school adviser and now advised as being inside the IR35 in one of my schools. My query is what happens if I don't exceed the tax threshold (last year I earned just over £10000). School have they will take basic rate of tax off my invoice - but do I then have to claim tax back after completing my self assessment? Sorry - it was so much easier completing the self assessment and paying NI contributions, this just seems to complicate things!

Are you a sole trader? IR35 doesn't apply to sole traders!

Yes I am but have been told that I meet a number of the criteria for being in IR35 under the public sector regs from April this year. It's all very confusing!

Disclaimer-Absolutely not a tax return expert of any sort- don't even know what IR35 is.

But, if it helps at all, I have been earning pitifully little(health problems). I am a self-employed sole trader, but some of the work I did in the last couple of years was classed as employed, cause that was their system ,and the only way they would do it. I filled in self assessment tax return, and then HMRC would just automatically refund me the tax that had been deducted.
Bit like enforced savings that you get after the end of the tax year.
Although now paying for NI has changed, they basically took my NI contributions out of the tax refund, and bunged the rest in my bank .

Another thought.
So on the self assessment tax return, I had to fill in the self employed stuff, as I usually do, and then also the employed stuff, which basically auto filled anyway, as the 'employers' had already given them that info.I just had to confirm it was correct.
Trust me, if I didn't find it complicated, it's not complicated.

Ir35 only applies if you're a limited company.

Sole trader is different i think...

I do both ltd company and sole trader accounts- only the ltd company tax return asks about ir35 status. Sole trader you just fill in as normal.

Thanks all. I'll check again with the employer about being a sole trader. Glad to hear a tax refund came along after completing self assessment.

I think IR35 is designed to stop people paying next to no tax and NI by paying themselves a minuscule salary through their company, and getting huge dividends.

It means the dividends and other "company" income can be treated as a wage and taxed accordingly.

Sole trader all income is taxed as income, so IR35 doesn't apply. I think your school have it wrong.

Also you say "in one of my schools" in your o/p. If you are providing services for multiple schools then IR35 definitely doesn't apply- you have to be working for a single employer as if you were an employee.

Is it an academy trust?
Did you tender through open competition?
Do you work in the same location?
Do they provide IT equipment?

If you are an employee then you may be able to negotiate holiday pay and pension. It isn't as simple as them taxing you on your daily rate.

If you earn £10,000 you must only work a few days a year- that doesn't sound like a genuine freelancer.

What does your contract say?

Also you say "in one of my schools" in your o/p. If you are providing services for multiple schools then IR35 definitely doesn't apply- you have to be working for a single employer as if you were an employee.

That simply isn't true. You can be within IR35 on one contract and outside on another. Having multiple contracts is not enough-- either before or after the new rules.

Thanks again all. I think I will seek further advice from an accountant. Whilst researching there appears to be lots of conflicting advice but can totally see how I can be in the IR35 with one contract and out in another! My contracts are relatively small (part time term time), but maybe I should put my rates up!

OP I am an accountant for a Local Authority and I've done a lot of work on IR35 over the last 12+ months.

If you are a Sole Trader then categorically IR35 / Off Payroll Engagements in the Public Sector legislation does not apply to you. Schools are a nightmare area for us at the moment as they just don't understand.

If you are working via an Intermediary, such as your own Ltd Co or a partnership then the likelihood is that the legislation will apply. The school will deduct tax and NICs from your invoice and you will need to reclaim it from HMRC if you remain under threshold for the full tax year.

This is the tool the school will use to define your status. Fundamentally, it is their decision how to pay you, so if they have a different interpretation of the contract to you, then you'll have to accept their judgement. But Yoy should be able to challenge factual inaccuracies, such as Sole Trader vs. Ltd Co. www.gov.uk/guidance/check-employment-status-for-tax

A word or warning, they may end up with HR / Finance at the Local Authority telling them that you can't be treated as Self Employed either, and that you need to be on payroll as an employee if you are subject to IR35. I'm purely warning you about this because I know that school advisers are an area being looked at very closely by HMRC and Local Authorities at the moment.

Thanks Fruit. I think I'll look at the tool and take it from there. My worry would be if I challenged it they would simply look elsewhere!