Member Article

The importance of professional IR35 contract reviews

The importance of having a professional IR35 contract review if you’re a contractor working in the private or public sector cannot be overstated. IR35 legislation and the “off payroll” rules for public sector workers is virtually the same and both relate to “disguised employment” and “intermediaries legislation”.

The number of guises IR35 comes under should be a warning to contractors of its tricky nature, but in essence it’s about acting/working as a business owner and paying close attention to the legislation.

It is vital contractors act as business owners. At a minimum, contractors should have:

• A business name or be working for an agency
• A letterhead, business card, compliment slip;
• An up-to-date website and corporate profile online and offline;
• Work with several clients;
• Show evidence of active marketing
• Raise invoices and show they’re paid
• Have up-to-date, accurate, books and accounts
• Have a business bank account and bank statements

Note that this is the minimum. As to the contracts signed with clients when undertaking contracts, each should be checked for the three main tests to determine whether they fall outside or inside IR35:

1. Control: a worker is not an employee unless the employer has the right to exercise control in terms of the right to control what work is done, where or when it is done, or how it is done. Note that it is the right of control that is the important issue and not the actual control.
2. The right to substitution: can you get a substitute or assistant to do the job? A self-employed person should have the freedom to choose whether to do the job herself or hire someone else to do it for her or help.
3. Mutuality of obligation: The obligation to be paid for the work done should be part of any contract – but a contract of employment consists of more than this, there needs to be obligation to offer and accept future work.

A professional IR35 contract review will provide assurance by:

• Checking the day-to-day working practices of the engagement undertaken by the contractor;
• A full report based on the contract and other information provided by the contractor;
• A written summary of the contractor’s status;
• Advice on fixing failed clauses;
• Amendments, agreed by the reviewers with the contractor’s end client or agency as necessary.

Alongside having a professional IR35 contract review, taking out tax investigation insurance is recommended as another worthwhile investment in your contracting future. Contractors, whether working in the private or public sector should pay close attention to the legislation themselves and also have an expert pay close attention to their contracts for them. With this three-step assurance: review, insurance, attention, contractors will stay on the right side of contracting and avoid falling foul of IR35 or off payroll rules.

This was posted in Bdaily's Members' News section by Sumit Agarwal .