IR35 is at the forefront of our every conversation. Amidst speculation around what the future holds with upcoming private sector reforms, and a growing number of IR35 investigations attracting attention, it’s easy to worry about what this means for your tax status.
In the latest spate of tribunals, former BBC presenter Christa Ackroyd has lost a £400,000 appeal against HMRC over the status of her contract with the broadcaster. This is not the first time that courts have sided with HMRC; in September 2019, three freelance BBC presenters lost their appeal against HMRC and were liable to repay income tax and National Insurance contributions.
In light of the growing number of cases, it’s important to ensure the status of your contract is protected - regardless of the fact that from next April, unless you work with a ‘small’ private sector firm, you will not be in charge of determining your IR35 status. The responsibility will transfer to your client, with the liability shifting from you to the fee-payer in the supply chain.
Given HMRC can investigate contracts dating back six years, being aware of the criteria commonly used by HMRC to determine IR35 status can help you to better structure your working practices, protect your IR35 position and ensure your compliance.
Use the right of substitution
The right (and ability) to provide a substitute if you are unable to undertake your duties is important to help distinguish you from an employee. In order to best evidence your case, it could be helpful to show that you have a substitute at the ready if you are ever unable to undertake work. Better still, try exercising the right of substitution.
Show you’re in control
When you provide your services through a limited company, it means that it’s likely you will have a greater level of control over your working hours and conditions, when compared to an employee. HMRC will consider such factors as what you work on, how you complete the work in addition to where and when. Where possible, it could be helpful to show where you have negotiated your contract, such as working location and pay.
Prove Mutuality of Obligation falls short of that required in an employment relationship
As an employee, your employer would ask you to fulfil certain tasks even if they don’t fall under your remit. For contractors, it’s generally accepted that you will be required to fulfil only what was agreed upon with your client for a set amount of time - and to move on once the work has been completed. Mutuality of Obligation, also known as MoO,can be hard to evidence, but a good example would include any instances where you have declined work. If you have or plan to decline work, as with all things IR35-related, make sure you do it in writing, just in case HMRC decides to investigate.
What else?
A number of other factors must be considered when determining IR35 status - and experts argue that the legislation’s downfall is the fact that status is rarely based on one consideration alone. So, here are some other factors to think about when setting your IR35 status and challenging what you think might be an incorrect decision made by your client:
Get an IR35 review
Arguably, the safest way to protect your IR35 status is to gain an independent review from an IR35 specialist, like Nixon Williams.
During an IR35 review, our experts will gather all of the information surrounding your contract and working practices to make an unbiased determination of IR35 status. If it’s likely that your contract will be caught by IR35, you will be provided with a list of recommendations to help you restructure your contract and working practices to help stay outside IR35.
Does your contract fall inside or outside IR35?
Get Your IR35 Status Reviewed