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A Short Explanation of IR35 
IR35 first reared its head via an Inland Revenue press release in 1999 entitled: "IR35: Countering Avoidance in the Provision of Personal Services".
The IR35 rules were invented primarily to stop freelancers (particularly IT contractors) from drawing income in the form of a small salary and large dividends from their limited companies, where ordinarily they would be paid a standard salary for performing the same role if they were not working via their own limited company.
In determining whether a person's employment is deemed to be subject to the IR35 rules or not, the Inland Revenue would need to work out if that person is 'employed' or 'self employed' according to the IR35 rules.
A person who worked 9-5 on a client site, had little or no direct responsibility and provided no tools of his own to complete a task would most likely be deemed as 'employed' and therefore subject to the IR35 rules. However, a freelancer who worked from home, performed tasks for multiple clients and used his own equipment to complete the work would more likely be deemed 'self employed' under the rules. The Revenue would look at the overall picture to determine a person's employment status, so the more pointers there are to genuine 'self employment' the better.
As a result, you should always ask a legal expert to look through any contracts you sign with clients, to ensure they do not fall under the IR35 rules. Additionally, your accountant will be able to provide you with advice on how best to ensure that your business structure is right for your needs, and where possible, you will not be liable under the IR35 rules.
