Is My Contract Inside Or Outside IR35?
As you are probably aware, IR35 is an anti-avoidance tax legislation introduced in 2000 and will be applicable to the private sector in 2020.
What is proven to be not so clear is how to verify if you should be working inside or outside the IR35 regulations. There are many ways to check your IR35 status, but the three central tests are Control, Substitution and Mutuality of Obligation.
How much autonomy do you have as a contractor in terms of how you deliver a project? If you have the below in your contract, you could be considered inside IR35:
Fixed start and finish times
Lunch break times and duration
Specific working days
Specific clauses enforcing the clients supervision and control over your work
These contractual obligations generally appear in a contract of employment rather than a contract of services.
As a contractor, you should have control over when and how you work.
If you are unable to attend a job, would you be permitted to supply a substitute? Is there a right to substitution in the contract then you most likely fall outside IR35.
As a contractor, you should be free to send someone in your place, provided that the work is completed to an equal standard.
Mutuality of Obligation:
Is there an ongoing requirement between yourself and the client to offer and accept work? If you are hired to complete a project with an end date and then move on then that indicates lack of mutual indication. However, an open-ended contract requiring you to perform various different tasks may more closely resemble employment.
If your contract specifies exclusivity or states any number of obligated hours of work a week at a set rate, then you could fail IR35.
As a contractor, you should be free to choose the projects that you want to work on and the clients that you want to work with. You should also be free to turn down work from any given client.
It is crucial to fully understand your position as a contractor or employee. If you fail an IR35 test, you will be liable to pay around 25% more in tax every year. You still wouldn’t benefit from employment rights or have a contract of employment with your client, so you could face critical financial issues with no real benefits or protections to speak of.
If you need further advice, don't hesitate to reach out to us and we will be more than happy to help you out.