Kingston

Kingston UK Ltd. is not a composite service company, nor is it a managed service company. 

The rules of IR35 will not apply if the contractor/freelancer receives all his/her income through an intermediary that falls within Schedule E and class one National Insurance contributions. This is the category you would fall into should you join Kingston UK.

Kingston UK will assess your employment status to establish whether or not you fall inside the IR35 regulations. Simply contact us and a member of the team will be in touch to speak with you and establish whether you’re IR35 compliant. 

 

What is IR35?

 

IR35 is a piece of employment legislation introduced in 2000 that applies to people who are employed through an intermediary, such as a ‘service’ or ‘limited’ company.

It was created to affect those who were taking advantage of tax breaks available to them by provising their services on a contractor basis instead of being in direct employment.

In the eyes of the government, these contractors should, in fact, have been taxed as any other employee.

 

The IR35 legislation has effectively closed this loophole and was created to increase the amount of tax and class one National Insurance paid by contractors and to remove the contractor’s right to dividend pay.

 

 

Who does it affect?

There is a common misconception that IR35 only applies to people working in the IT sector. This is not correct. The legislation is not targeted at any particular occupation or business sector. It can apply in any business sector:

 

• Where an individual (known as a worker) provides services to another person (known as the client)
• Under arrangements involving an intermediary (such as a company or a partnership)
• In circumstances such that if the contract had been made directly then the worker would have been an employee of the client

Anyone who structures their working arrangements in this way could be affected by the legislation. Examples of occupations where people work through service companies run right across the board, including medical staff, chief executives of large PLCs, legal and accountancy staff, construction industry workers, clerical workers, press officers, journalists, photographers and many others.

For more on IR35, visit the HMRC website or contact our team.

 

 

Composite and managed service companies and the ‘service company’ legislation (IR35)

 

Composite and managed service companies are subject to IR35 legislation.

 

Composite service companies (CSCs) exist in a number of different areas of business. They usually employ workers and then supply them to clients for whom they work. Employees are usually paid a salary and can be shareholders in the company.

 

The employee’s shareholding will then usually entitle him/her to receive dividends based on the amounts received by the composite service company for the services the employee performs for the client’s business. These dividends will supplement, often substantially, the small amount the employee is already receiving from the CSC in wage or salary payments.

 

Some promoters, as an alternative to the CSC, offer managed service companies (MSC). The promoter will set up the company, appoint the director(s), company secretary etc and deal with all the administration. The “worker” will normally be an employee and shareholder of the MSC and will be entitled to receive salary, expenses and dividends. The promoter will retain its administration fee and the balance is available to be paid to the worker.

 

Unlike the CSC there is only one “worker” in an MSC. However, as with CSCs, the MSC will have to consider whether the service company legislation applies to individual engagements with clients.

 

A loophole, which meant that those classed as ‘domestic’ workers (such as nannies, chauffeurs and butlers) could be engaged through intermediaries (i.e. service companies) and make larger savings on tax and National Insurance contributions than through direct employment, was also closed in 2003.

 

The above and further information can be found at the HMRC website.