IR35 Glossary


Agency/Recruitment Agency: the organisation through which the contract is obtained and administered


Case Law: refers to law and legislation based and developed using real life cases, as with IR35.


CEST: Check Employment Status for Tax, also HMRC’s self assessment tool.


Chargeable expenses: expenses that can be charged directly to the client


Confirmation of arrangements letter: a written document which confirms the way in which a contractor operates on a day-today basis (working practices) from the end client


Control, Substitution and Mutuality of obligation: a set of principles used in the determining of IR35.


Compliant Umbrella Company: an umbrella company that claims to conform to HMRC tax regulations by deducting NI and income tax via PAYE.


Deemed salary: the payment made by the director of an intermediary company to his/herself that is relative to the payment received by a permanent employee of the same description


Disguised employee: a limited company contractor whereby IR35 applies A.K.A being inside IR35


Dividends: the payment received by the director(s) and/or shareholder(s) from the company’s profits


End user: the hiring company/organisation/client for which the contract is undertaken


Friday to Monday phenomenon/Tail End Charlies: contractors who are disguised employees.


Genuine contractor: a limited company contractor whereby IR35 does not apply A.K.A being outside IR35.


HMRC: Her Majesty’s Revenue & Customs, the UK tax service.


Inside IR35: term coined to describe a limited company contractor where IR35 applies A.K.A a disguised employee.


Intermediary: an entity that exists as a means of operation between the worker and engager.


Intermediaries legislation: a piece of tax legislation implemented to tackle the tax avoidance of limited company contractors who should be classed as, and taxed like, a permanent employee of their end client


Liabilities: the amounts of backdated taxes due if caught by the legislation


Limited company: a private business where the owners’ debt responsibility is restricted to the amount invested.


Limited company contractor: a worker, who is usually one and the same with the Director, who operates on a contract basis through a private business where the owners’ debt responsibility is restricted to the amount invested.


Notional contract: or ‘hypothetical contract’ refers to the idea the taxman or investigating person forms in determining a contractor’s relationship with the client.


Off payroll workers: those workers at a company that are not on the PAYE payroll. This usually refers to contractors, freelancers and consultants.


Outside IR35: term coined to describe a limited company contractor whereby IR35 does not apply A.K.A a genuine contractor.


PAYE – Pay as you earn: a method of paying income tax and national insurance contributions via a company payroll.


Personal Service Company (PSC): interchangeable with limited company where the contractor pays themselves tax efficiently, through a combination of low salary and high dividends.


Public Sector: the part of an economy that is controlled by the government.


RTI: Real Time Information – information about tax and other deductions under the PAYE system transmitted to HMRC by the employer every time an employee is paid.


Sole trader: a worker who operates a business as an individual and is personally liable for all debts.


Status tests: the generally accepted methods of deciding on whether a limited company should be considered a disguised employee or a genuine contractor.


Substitute: an alternative worker who undertakes the operation of a contract if required.


Working practices: the day-to-day working relationship between the contractor and end client.