As a contractor, it is imperative to have an understanding and awareness of IR35 and how it’s determined to ensure that you are paying the right amount of Tax and National Insurance.
There are many factors that are assessed and considered when determining whether you are outside IR35 (self-employed contractor) or inside IR35 (a disguised employee). If you have multiple contracts, your status can vary from contract to contract and you may well be working within both statuses simultaneously.
How is your contract defined? A contract of service or a contract for services?
Your agreement is a legally binding document and needs to define your relationship to the client or organization, as well as outlining your working practices and services that you are providing for the specific job.
There are four key areas that are required within the contract to ensure you are outside IR35 are:
Control – you must have complete control of how the work is completed, using your own methods.
You are not entitled to holidays and time taken off would be under your own discretion.
Substitution – There should be an opportunity to substitute yourself for another suitably qualified person, or sub-contract whilst retaining the control and risk associated with this.
Mutuality of Obligation– In general practice, this means that there is no obligation on the client to provide the work nor is there an obligation for you to accept any work which is provided.
A contract that is strong from an IR35 perspective would explicitly stipulate that there is no mutuality of obligations when it comes to work, not within the scope of the current one. There should also be the ability to walk away.
The Right of Dismissal – Are you required to give a notice period? As a contractor, you are able to terminate the contract immediately or a short notice period.
Does your working practices classify you as an employee or self-employed?
To be identified as self-employed and therefore outside IR35, your relationship with the client must be business to business. Here are some key factors:
For example, if you are being mandated to complete structured workday hours this would imply employment, leaning towards being inside IR35
If you still have concerns or questions regarding your preparedness for IR35 or Status Determination Statements please get in touch – we would be happy to help.