IR35, also known as the “off-payroll working rules,” is a piece of legislation in the United Kingdom aimed at preventing workers from avoiding tax and National Insurance contributions by providing their services through an intermediary, such as a personal service company, instead of being directly employed by the client. The rules are designed to determine whether a worker is an employee or a self-employed contractor for tax purposes.
If a worker is found to be “disguised employee” under the IR35 rules, the intermediary (e.g. the personal service company) is required to pay the appropriate employment taxes and National Insurance contributions on behalf of the worker, rather than the worker being responsible for paying these themselves as a self-employed individual.
In recent years, the IR35 rules have been the subject of significant debate and changes, particularly with respect to the private sector, where they have been tightened to better ensure that workers who should be classified as employees are not able to avoid paying the appropriate employment taxes.