The general information given here acts a guide to get you started, but please remember we leave specific tax advice to the professionals.
IR35 legislation applies to workers supplying their services to clients via an intermediary, such as their own limited company, where they would be classed as an employee under employment law if it was not for the intermediary.
In the eyes of HMRC, these workers should be taxed like employees.
It is a notoriously complex area, and falling foul of the rules, as interpreted by HMRC, can lead to substantial costs in back taxes, fines and penalties.
Liability rests with the contractor, or the contractor’s limited company, (and even to the agency placing you, if one was used).
On top of this, if you fall within IR35 tax status, you could suffer a 20% decrease in your net take-home pay. That will naturally impact on the funds available to you for a mortgage offer.
Bear in mind that being a CIS contractor does not, by itself, ensure that IR35 rules don’t apply to your contracted arrangement(s).
We advise you to check your individual status with a suitably experienced professional advisor.
CISMortgage.co.uk cannot provide any specific guidance on this complex area of contract law, but there are some free online tools to help you get an initial idea of your current position. For example, HMRC has this tool:
There are also independent online sites (not associated with CISMortgage.co.uk in any way), such as: IR35
It allows you to do a free initial review online, with options for additional paid services depending on the result.
Please note we have no affiliation with ir35testing.co.uk or any similar site and the information here is provided merely as a general guide.
You should always seek advice from a suitably qualified tax advisor or employment lawyer.
If your contract is not suitably worded to definitely avoid IR35, then you may be liable to pay additional tax, whether immediately or at a future date, and this may affect your net income calculation for other borrowing.
For a mortgage application, it is helpful to confirm that you have obtained professional assurance that your contractual agreement is not liable to IR35. That evidence could boost the amount of any offer made to you by a lender.