The intention of IR35 is to seek out ‘disguised employment’, which means looking into whether the contract between a freelancer and their end client is defined as a contract for their services, or whether the contract actually insinuates that their role fulfils more of a traditional employee description.
It’s likely that hearing ‘IR35’ or ‘The Intermediaries Legislation’ as it is formally known, will set off alarm bells if you’re a contractor. After all, it’s only natural that while becoming a popular topic of discussion, information is exaggerated or misunderstood. That’s why we’re going to help to clear up some of the popular myths and misunderstandings surrounding what does and doesn’t influence your IR35 status.
- More than one contract
If one of your contracts is found to be inside IR35, any other contracts you are working to will not actually affect your status, as your IR35 status is evaluated based on a contract by contract basis.
- A right of substitution
One of the key indicators of IR35 status is right of substitution. As long as you can prove that you could provide a substitute to take on your role if necessary (if you were ill, for instance), then you will be compliant.
- Your manager
Unfortunately, your contract may use language that suggests your end client has full control over your working method. For example, phrases such as ‘reporting to’ can be frustrating. With this in mind, it’s reassuring to know that you don’t need to fret, as long as you do control your own method of working and you client doesn’t have any direct control over how you fulfil your contract.
- Setting your working hours
Typically, as a contractor you can set your own working hours without influence from the end client. While not a totally IR35 proof indicator of self-employment, it is likely to help.
- Sick pay and holidays
Receiving holiday and sick pay is a real alarm bell to HMRC that you are in fact in a contract of employment. However, it’s useful to be aware that not receiving them does not automatically separate you from being a traditional employee.
- Using equipment
Contrary to popular belief, sometimes contractors can use equipment owned by clients rather than their own, often for safety and security reasons. This should not be a reason for a contract to fail an IR35 assessment.
- Working from home
Understandably, there are circumstances where it is completely necessary to work at your client’s site. A perfect example of this would be oil and gas contracting. So, being able to complete your job by working at home isn’t the ultimate factor that determines your IR35 status.
- Expenses
The expenses you can claim as a Limited Company are not actually affected by IR35, despite what people think. Your Limited Company expenses claims can continue without having to worry about being found inside IR35 legislation.
We understand that IR35 can seem unclear and misleading, especially with incorrect information being passed along by word of mouth. We recommend consulting the professionals in order to ensure you’re separating the facts from fiction.
When considering your finances as a contractor, it always pays to be vigilant and to make sure you invest in an IR35 compliant Limited Company accounting solution. IR35 is in the process of being reviewed by the UK government, with a view to making it ‘more effective’. Now is the time to start making sure you don’t ignore your IR35 compliance.