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Coaching
and IR35
Tax is an area many of us feel ill-equipped to understand. IR35
is one area of tax law and application that you may as a coach
need to understand. This provision will only affect you if you
provide your services through a limited company or a partnership.
Her Majesty's Revenue and Customs (HMRC) introduced IR35 in
1999, relating specifically to the tax position of Personal
Service Companies (PSCs). These are so called one-man limited
companies where there is typically a sole director who provides
the services and holds the majority shareholding. It was introduced
to stop people who own limited companies from drawing a small
salary and paying themselves the rest of their payment in dividends.
Dividends don't attract as much tax as income.
The rules are that if it wasn't for the presence of the 'intermediary'
i.e. the limited company or partnership, the relationship between
the person providing the services as a coach and the client
would be that of employee and employer. The test is to consider
whether the service provider performs the role of an employee
if there were no limited company or partnership. If this is
the case, they will have to pay PAYE and National Insurance
Contributions as a deemed employee.
IR35 uses the existing rules pertaining to 'employed' or 'self-employed'
status. This considers factors such as who controls the hours
worked, the type of work undertaken and who supplies the equipment
to perform the work.
So, if you find yourself working with just one client company
for the majority of the time, providing services which you could
well be providing as an employee, you will need to consider
whether you need to take action.
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