IR35 is a set of rules governing the amount of your company's income which must be paid out as a salary. Dividends do not attract National Insurance contributions and in the past it was quite common for company directors to take a large proportion of their income as dividends instead of salary. Indeed in some cases, directors paid all of their income as dividends thus avoiding paying any National Insurance.

So, it was hardly surprising that the HMRC eventually acted to close this loophole. This they have done with legislation referred to as IR35. This tax regime tries to apply fresh rules to earlier employment status legislation, much of which had already been challenged over the years in the courts. As a result IR35 is overly complicated and unnecessarily burdensome, which accounts for many challenges, a large proportion of which HMRC has lost.

However, do not let any of that become a worry to you. Assuming that you are not trying to evade tax that others and you should be paying, you will not find it particularly onerous and we are on hand to give practical day-to-day advice.

Decisions on IR35 status are legal matters and, not being lawyers, we are only able to give general advice. Individual circumstances vary and it is also quite possible to have an IR35 contract or a non-IR35 contract running simultaneously or separately in the same tax year. Again, do not worry - our system caters for this.

For the sake of explanation, if you are ultimately recruited by a provider to do the work, you should forget that link, in the same way you should ignore the link of running your own company. HMRC will judge you and your position with your ultimate client, based upon the nature of your work. In simple terms, your status under IR35 rules could be as follows:

• if you go to a client and replace an employee, possibly doing maternity cover or repalcing a manager or director, your work would fall under IR35
• if on the other hand, you visit the client's offices and carry out a project you are more likely to be outside IR35
• if you are a consultant you may well be outside IR35 but this is a grey area and you may possibly need legal advice

There is a common misconception that all interim roles fall within IR35 but this is not true.  A recent survey showed that over 70% of all assignments were for project work.

IR35 is not really arduous; it simply means that 95% of all income, less certain expenses incurred in carrying out a contract for a client, has to be paid out as salary to the person who earned it.

A much more detailed discussion document is available in Client Downloads 'IR35 explained'. You will need a username and password to access this section.