Income tax - IR35, contractors and interim work - What to consider for the next day rate role - VMAGROUP

​Inside and outside IR35: What contractors need to consider for their next day rate role in 2022

4 months ago by VMAGROUP

​Inside and outside IR35: What contractors need to consider for their next day rate role in 2022

Income tax - IR35, contractors and interim work - What to consider for the next day rate role - VMAGROUP

Within the last year, we have seen a huge rise in the opportunities within the communications, digital and marketing industries. However, as job vacancies are at an all-time high, working on a contract or interim basis is now more lucrative than ever before.

When entering the contractor market, you are probably thinking about the new, exciting projects and the vast amount of experience that you will gain… But to ensure that your day rate is paid correctly, you will need to determine whether your contract is inside or outside IR35.

What does inside IR35 mean?

Introduced in April 2000, the off-payroll working rules ensure that contractors operating in the same way as a permanent employee are taxed at an appropriate level. That means that if your contract is inside IR35, you have to pay income tax and National Insurance, just like permanent employees. Often this is done via an umbrella company.

What does outside IR35 mean?

A contract outside of IR35 means that the HMRC will regard you as self-employed. Therefore, you will be able to pay yourself in a tax-efficient way. This may involve working on defined marketing, digital or communications projects, or working for more than one client. To determine whether a contract falls inside IR35 or outside IR35, you can use HMRC’s check employment status for tax tool.

How do they compare?

Your IR35 status will have an impact on the way you pay your taxes.

Inside IR35:

  • You are regarded as an employee for tax purposes

  • You need to pay income tax and National Insurance contributions. Your fee payer will work out and pay these on your behalf, usually via an umbrella company

  • Even though you are viewed as an employee, you may not be entitled to employee benefits like holiday pay or sick pay

Outside IR35:

  • You are self-employed and operate as a business

  • You are responsible for your own taxes

  • You can pay yourself in a tax-efficient way

You can continue to run your limited company, even when your current contract is inside IR35 – professional contractors often have a mix of both. It is however worth noting that you may need to make deemed payment to HMRC for the contracts outside the IR35 rules. As working this out can be complex, we advise consulting your accountant.

At VMAGROUP we aim to make the hiring process as smooth as possible, for our contractors and clients alike, by assisting all parties in navigating their way through challenges presented by the legislation.

Whether you are open to new opportunities or are looking for additional support on an interim, contract or temporary basis – please get in touch with our Interim team. 

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VMAGROUP is a leading international interim, contract, temporary and permanent recruitment and executive search specialist. We are specifically focused on providing support to the communications, digital and marketing communities.

Our specialist practice areas cover: communications, corporate communications, internal communications, change communications, PR, media relations, financial communications, CSR, public affairs, investor relations, marketing, digital marketing and agency services.

We have a reputation for providing expert consultancy services and advice, supported by in-depth knowledge of the professions we recruit for. Our thought leadership and benchmarking studies have become go-to resources for the communications and marketing industry, supporting planning and decision-making for organisations of all shapes and sizes.

In the UK, VMAGROUP has offices in London and Manchester and in Europe, VMAGROUP has offices in Amsterdam and Brussels, but we work with organisations and individuals on a global basis.VMAGROUP is committed to equal opportunities and is a Diversity Pledged Recruiter. 

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