IR35 is a set of tax laws implemented in order to prevent workers, who would have otherwise been considered an employee if they were providing services directly to the client, from claiming the tax benefits received by working through their limited company.
The legislation hinges on whether a worker is treated as an employee or in the style of a self-employed external party.
Those who fall inside of IR35 are considered a 'deemed employee' and will incur the appropriate tax and national insurance liability that would be incurred by any employee.
Those who fall outside of IR35 are not considered a 'deemed employee' and can operate just as any other limited company.
Currently, as of 6 Apr 2021, new legislation requires medium and large-sized clients in the private sector to asses roles for IR35, removing the liability from the contractor. This legislation has been in place in the public sector since 6 Apr 2017.
However, subject to ratification by parliament, the government is proposing to repeal this legislation, returning the liability of IR35 status determination to the contractor.