IR35 Jargon Buster

There’s a lot of terminology and jargon surrounding IR35 and related legislation, so we thought it would be useful to compile a list of a lot of the key terms with a more layman description of what they mean. The below should get you started on the key terms you’ll hear when speaking about IR35:

Arguable Point: Usually spoken about with regards to Status Tests. An arguable point is, reasoning which may cause an exception to the usual rule.

Blanket decision: A scenario in which the end client makes a decision to collectively deem contractors or assignments as either inside or outside IR35.

CEST: HMRC’s IR35 assessment tool – “Check Employment Status for Tax”.

Confirmation of Arrangements: A letter signed by both the contractor & end-client which confirms the true nature of the working conditions of the assignment.

Disguised employment: A worker who carries their work out in a way an employee would, whilst operating through an intermediary i.e. a Limited Company.

End client / hirer: The person or company at the end of the supply chain, usually the company the contractor is completing work for.

Fee Payer: The business that pays the contractor’s PSC.

Indemnity: Level of insurance cover.

IR35: It refers to the Inland Revenue’s anti-avoidance tax legislation designed to tax what they would distinguish as ‘disguised’ employment at a rate similar to employment.

Inside IR35: For tax purposes this means you are considered a disguised employee of the end client, and are therefore subject to the same rules as PAYE workers.

Off-Payroll Legislation: A reform to IR35 that was introduced in April 2017, initially in the public sector, that is used to identify ‘disguised’ employee’s and ensure taxes are paid by treating them as an employee rather than as a LTD company contractor.

Outside IR35: A situation in which the rules of IR35 do not apply to a LTD company contractor as they are perceived to be a genuine contractor rather than a disguised employee.

Status Determination Statement: A comprehensive statement completed by the end-client which declares a contractor’s deemed employment status following a full IR35 assessment.

Status test: The process of deciding whether IR35 regulations do or do not apply to an assignment.

Substitution: The ability for the contractor completing an assignment to provide a replacement contractor to complete the assignment under the same contract.

If you have any questions or if there’s any other terminology you think needs covering please email [email protected].