It was postponed from April 2020, but as of April 2021, we can put off IR35 (or Off-Payroll Working Rules) no longer. This month, CRM is here to guide contractors along the twisting path of IR35. You can also read our guide for employers here.
If a contractor is identified by HMRC, or, under the new rules, by their customer, as a ‘disguised employee’ under IR35 rules, the financial impact of the tax owed on their income is significant. As a contractor operating through a limited company, you may need to prove to HMRC that you are in business on your own account and not acting as an employee. Here are some pointers to help you stay outside of IR35:
- Your work situation differs from an employee
Can you demonstrate that you are treated differently to employees? For instance, that you don’t have minimum hours, pension arrangements and other benefits. Keep all correspondence that shows you are contracted to provide a specific service in a business-to-business situation and are not under the management of a certain person.
Under investigation, HMRC will try to establish whether there is Mutuality of Obligation (MOO). It is important that you are engaged to work on a certain project and that you’re not offered different work until your contract ends, as an employee would.
- Your company name and marketing
A company named after yourself looks more suspiciously like a ‘personal services company’ than one with a different, more business-focussed name which highlights that you could bring in others to carry out work. Do you promote your business and advertise for new work? This also demonstrates that your business is separate from you.
- A broader client base
Can you split your time between two or more clients? If you work mainly for one client, it might be tricky to convince HMRC that you’re not acting as an employee. You need to demonstrate control over your work and that you choose the hours worked and provide your own equipment.
- Your own workspace
An office space for your own company reinforces your position as an independent company. Proof of purchased software licences, professional development, trade body memberships and business insurances also imply that you work for other clients.
If you’re feeling vulnerable to IR35 inspection, it’s very important to have evidence in your armoury of as many of these points as possible and it may be necessary to seek legal advice to get your contract reviewed. A standard contract is unlikely to be satisfactory as HMRC will expect specific agreements with details of each project you work on and exactly what you do.
CRM can recommend an excellent Contract Review Service to assist with this task. Getting a professional contract review enables you to pre-empt any HMRC investigation and have peace of mind that you have a strong case.
Off-payroll working rules offer yet another significant challenge to contractors and if you’re finding IR35 way too taxing, contact the experts at CRM for help on 01865 379272.
