If you work as a contractor through your own limited company in Kent — whether in IT, engineering, finance, construction or another field — IR35 is a piece of legislation you cannot afford to misunderstand. Getting it wrong can result in a significant and unexpected tax bill.
What is IR35?
IR35 (the off-payroll working rules) is designed to prevent 'disguised employment' — where someone works in a way that is effectively employment but is paid through a limited company to reduce tax. If HMRC determines your engagement falls inside IR35, you pay broadly the same tax as an employee.
Inside vs outside IR35
The key factors HMRC considers are:
- Substitution: can you send a substitute to do the work, or must it be you personally?
- Control: does the client control how, when and where you work?
- Mutuality of obligation: is there an expectation of ongoing work beyond the current contract?
A contractor with genuine substitution rights, who sets their own working methods and is engaged on a defined project, is more likely to fall outside IR35. One who works regular hours at a client's premises and is managed day-to-day is more likely inside.
Who decides your IR35 status?
For contracts with medium and large private sector clients, the end client determines IR35 status and must issue a Status Determination Statement. For small company contracts (fewer than 50 employees, turnover below £10.2m), the responsibility remains with you as the contractor.
What should Kent contractors do?
- Review every contract carefully — last year's determination may not still apply
- Keep contemporaneous evidence of how the engagement works in practice
- Do not rely solely on contract wording — HMRC looks at the reality of the arrangement
- Consider using HMRC's CEST tool as a starting point
The financial impact
Being placed inside IR35 changes the tax picture significantly. The extra cost compared to operating outside can amount to tens of thousands of pounds per year for higher earners. Planning — including pension contributions and salary structuring — can mitigate some of the impact.
Talk to us about your situation
Our chartered accountants work with small businesses, landlords and contractors across Surrey, Kent and Sussex. Get in touch for a free initial consultation.
