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IR35 has its own special terms and the following is a glossary of key terms as they apply to the rules in their application prior to 6 April 2020 where the end client is in the private sector (and prior to 6 April 2017 where the end client is in the public sector). The terms, as defined by HMRC are set out in their Employment Status Manual at ESM8020.
- ‘Client’ – the entity for whom the worker provides his or her services. The ‘client’ could be any third party in the contractual chain.
- ‘Company’ – a body corporate or unincorporated association, but not a partnership.
- ‘Deemed employment payment’ – the amount that the intermediary is treated as paying to the worker under the IR35 legislation and which is chargeable to income tax as employment income. The National Insurance equivalent is the ‘worker’s attributable earnings’. For simplicity’s sake, the term ‘deemed employment payment’ is assumed to refer to the amount liable to both income tax and National Insurance, unless otherwise stated.
- ‘Intermediary’ – the third party through which the worker provides his or her services. An intermediary could be a company (e.g. a personal service company or a service company), a partnership (including a limited liability partnership), an unincorporated association or an individual.
- ‘Relevant engagement’ – an engagement to which the IR35 legislation applies.
- ‘Worker’ – the individual who personally performs the services for the client.
- ‘Worker’s attributable earnings’ – the National Insurance equivalent of the ‘deemed employment income’ on which Class 1 National Insurance contributions are payable
This is an extract from our tax report IR35: Tax Tips for Contractors – find out more here.