So, you’re an employee and you have a nice salary and all. You also happen to be a landlord and as such, you receive rent from your tenants. Worried about the implications of being a landlord on your taxes? Well, worry no more! We are here to walk with you through this tricky situation and help you see through it. That’s because there is the intermediaries’ legislation tax that can leave you bewildered in case your secondary earnings exceed a threshold amount. But what exactly is this tax and how does it affect you? Keep reading for more details…
What is the Intermediaries Legislation Tax?
The intermediaries legislation was introduced in 2000 to tackle tax avoidance by removing the benefit of being self-employed and paying tax at a lower rate. It ensures that individuals who are engaged in certain types of work are taxed on a similar basis to employees. The legislation applies to contractors who provide services to clients but who may not be classified as employees for tax purposes. This is usually because the company does not have a significant degree of control or supervision over the individual. The criteria for determining if a contractor is subject to intermediaries legislation tax are complex. The rules are designed to capture those who would otherwise be treated as employees and therefore be taxed at a lower rate.
Why Does Intermediaries Legislation Exist?
The intermediaries legislation was introduced to stop contractors from paying a reduced rate of tax on the basis that they should be treated as self-employed. The government believed that this was unfair and that contractors should pay the same amount of tax as employees. Since the introduction of intermediaries legislation, the number of people being treated as employees has increased.
Why Does Intermediaries Legislation Matter?
At present, intermediaries legislation or ir35 is focused on determining whether or not those who use contractors are liable to pay them as employees. This means that the legislation is more concerned with the people who hire contractors rather than those who are hired. As a result, contractors themselves will only be affected if they work directly for the government. The government has always been concerned with the way that contractors are being taxed, especially when they’re not being paid in the same way as employees. There’s a big difference between the way that contractors and employees are taxed because contractors are self-employed and don’t have to pay any tax on their earnings. This means that contractors are often able to take home more money than employees who are taxed as a salary. When you’re running a small business, it’s easy to become overwhelmed with the volume of regulations and compliance standards that you need to adhere to. If you’re struggling to understand your obligations as an employer, it can be tricky to know where to start. With so many different pieces of legislation around at any given time, it can be difficult to keep track of them all. Intermediaries legislation is one such piece of legislation that we see quite frequently in our work as payroll experts. In this case, this is something that you really have to understand.