If you are a contractor – especially one working through a limited company – you will know how much of a pain complying with IR35 can be. If you are found to be ‘Inside IR35’ on an assignment this means that you will be taxed to a similar degree as an employee for the duration of the assignment, leaving you with significantly less take-home pay. We’re here to help you discover if you are potentially inside or outside IR35.
As such, it is a good idea to look through the below questions before taking on any work, especially a more longer term contract and one worth a lot of money. These questions can’t give you a 100 per cent certain answer (only a thorough IR35 review completed by employment law specialists such as Brookson Legal Services can do that) but they will help you get a good idea. And you can always talk to us at Brookson for more help to avoid falling foul of IR35.
One of the benefits of becoming a customer of Brookson is that you are entitled to unlimited IR35 reviews and advice, so you can be assured that you are paying the correct amount of tax on each assignment you undertake.
Does it have to be me who does the work?
If you are busy, could you send one of your employees – or hire someone new – to perform the services? If so, this counts in your favour. However, if it has to be you who undertakes the work then you stand a higher chance of being caught by IR35; after all, if you were hired for a permanent job, you wouldn’t be able to send somebody else to work your shift for you.
A substitution clause in your contract will go some way to demonstrate that your client does not require the personal service of someone in particular. However, if there are too many restrictions imposed on your right to substitute, this can make the substitution clause unworkable, therefore it is always best to have the contract reviewed by a specialist. For Brookson customers, this is something Brookson Legal Services can do for free of charge.
Are you being paid for the job or your time?
Let’s say you’re an IT contractor tasked with building a new website. Are you being paid a set amount upon completion of the job, or are you charging for six hours of your time whether or not the site is completed at the end of it? The former falls outside IR35, but if you’re paid by the hour (or day, week, etc) then you’re more likely to be counted as an employee.
How many clients do you have?
As a rule, most permanently employed people work for one company; or occasionally two or three. However, if you’re self-employed you might have five, ten or even more clients on a regular basis. If you only have one or two clients, you are more likely to fall inside IR35 and be treated as an employee, so try not to put all your eggs in one basket and if you are providing services to one client, keep an eye out for other potential opportunities so you can demonstrate that you are seeking to build a client base and you are not solely reliant on one organisation for work.
Who provides your equipment?
One aspect looked at for IR35 is where the equipment needed to do the job comes from. In general, if you provide your own equipment you’re more likely to be counted as self-employed. However, this has to be more than just pens and pencils or a hard hat; it only counts if you’re providing the main items of equipment needed to complete the job.
For example, a freelance plumber would need all their own tools, while a contractor working online would be expected to own their own computer. If your client provides you with something major like this, it could lead to you falling within IR35.
Where you risk your own money, for example purchasing assets/equipment, needed for the job, and training, and contribute towards the running costs and other overheads of the company, this is clearly indicative of you being independent.
How flexible is your time?
Employees are generally expected to work set hours, and this logic is used to determine whether or not you fall within IR35. To be counted as self-employed for this purpose, you would need to have a high degree of control over how, when and when you complete the work.
How closely supervised are you?
This one is fairly tricky to define, and it catches quite a few people out. The basic premise is that a contractor should be in charge of how, when and where the work is completed, within reason. For example, it’s fine if a client needs a job doing by the end of the week, but not if they mandate that you have to spend all of Wednesday and four hours of Thursday on it.
Similarly, you should have control over where you work, as long as it is feasible. A freelance construction worker would obviously have to work at a building site, but a social media marketer should be allowed the freedom to work at home, in their own office space or at the client’s workplace if they want.
So are you inside or outside IR35?
If you are falling outside IR35 for the majority of these, then you should be okay. However, if you aren’t sure then it is always a good idea to get some specialist advice. At Brookson we can help you out with a free consultation, so don’t hesitate to get in touch.