How to Protect Yourself From IR35

How to Protect Yourself From IR35

23 August 2019

When private sector organisations are charged with judging a contractor’s IR35 status from April 2020, more limited company contractors are likely to be classified as ‘inside IR35’.

To prevent paying more tax, contractors should take steps now to ensure compliance in the future.

In this blog post, we detail a few of the things you can do to give yourself the best chance of avoiding an inside IR35 judgement.

Make sure you aren’t named in the contract

Remember that it is your company that’s providing services to the client, not you. You should always operate under a ‘contract for services’ arrangement through your limited company.

The contract isn’t everything in IR35 judgements, but if you are named in a contract and are subject to an investigation then an inspector may interpret your working relationship as a ‘contract of service’.

Think about who could substitute for you

Being able to send someone else to complete work on your behalf is something of a silver bullet in IR35 judgements because it proves that you are not providing a personal service.

You should have a substitution clause in your contract, but this might not always be enough. You may need to show that you have exercised this clause or have a database of suitable contractors that you think could fill in for you.

Tell, don’t ask

The degree of control that a client has over a contractor is another key indicator of IR35 status. If you want to prove that you aren’t an employee then don’t behave like one by asking when you should be telling.

When it comes to taking time off, for example, you can demonstrate that you are in control of your own working time by gently informing the client when you will be absent, rather than asking for time off.

Work from home and set up a website

Working from home and setting up your own website might seem like window dressing measures, but these things do indicate that you are operating as a separate entity. And these things are brought up in IR35 tribunal judgements.

Keeping a website up to date shows that you are proactively marketing yourself as a limited company contractor, while working from home demonstrates that the client has little direct control over where you deliver your services.

Be careful with any extra work

All work that you do for a client should be detailed in the main contract. If you spot supplementary tasks that need to be completed, but which are outside your contract, then completing these tasks sends a message that the client has engaged you for your expertise and trusts you to get on with it.

If, on the other hand, a client asks you to complete work that’s outside the scope of your original contract then you should be careful. If you complete a major task that’s outside of your remit, this shows that the client has a high degree of control and demonstrates some mutuality of obligation outside of the contract terms.

For more information on IR35 and how you can avoid paying extra tax, speak to a member of the team today. Call: 0800 121 6513.