Umbrella Company

you're in the clear

IR35 is tax legislation introduced in the year 2000 to close a loophole that was allowing many contractors and self-employed workers to avoid paying tax and National Insurance Contributions. One of the main reasons contractors choose to work through an umbrella company is to remove any concerns about the IR35 legislation.

IR35 prevents workers from using limited companies or intermediaries to reduce their tax and NICs when they should be paying tax as if directly employed. Prior to IR35 it was common for a contract worker to pay themselves using dividends. The IR35 rules stated that if the relationship between the worker and the end client would have normally have been one of direct employment, then the worker should pay tax and NICs like any normal employee. Various tests and questionnaires have been created to determine the relationship between a worker and an end client, although none are conclusive.

All contractors using BBuffalo are unaffected by IR35. The agency/client pays the contractor's earnings to BBuffalo which then pays the contractor after deducting tax and NICs. No dividends are paid.

They key points are that with BBuffalo:

  • You pay tax and NI using a PAYE scheme
  • You legally minimises your tax bill by claiming allowable expenses
  • You are not paid dividends