Our best tips for Staying Outside IR35
From April 2020, contractors working with medium and large private sector companies will no longer be able to determine their own IR35 status. This responsibility will be transferred from the worker to the client, which has been the case in the public sector since 2017, so we’ve put together some useful tips for staying outside IR35.
Without the power to decide whether the service they provide their client is a genuinely self-employed one or is more reflective of employment, there is widespread concern among contractors that they will be wrongly placed ‘inside’ IR35 by their engager.
While many private sector companies should be in a position to administer the IR35 rules, meaning contractors will be able to continue working outside the legislation, it’s crucial you know how to go about challenging an IR35 decision, should you feel it is inaccurate. Below we look at 5 tips to staying outside IR35.
Staying Outside IR35
Tip 1 – Present your case
First and foremost, you need to present your case for belonging outside IR35 to your end-client. To maintain a healthy client relationship, it’s important you formulate a structured and credible argument that identifies specifically why you believe your contract should sit outside the scope of the legislation – whether this is because you do not provide a personal service, Mutuality of Obligation (MoO) doesn’t exist or you do not work under the direct control of your client.
You should also have good grounds to challenge an IR35 decision if you feel you have been blanket-placed inside the rules by your client.
Tip 2 – IR35 contract review
Think seriously about obtaining a second opinion, preferably in the form of an IR35 expert, who will offer objective advice based on years of industry knowledge. Should a specialist advise you that they believe your contract belongs outside IR35 also, you are well-placed to raise these concerns to your client.
Tip 3 – Contact HMRC
Assuming that your client disagrees with your view or even the opinion of an IR35 expert, the next step would be to contact HMRC. You can either do this yourself or a specialist can represent you.
Should your client have used CEST, HMRC’s much-maligned IR35 tool, to set your status, there’s a strong chance the taxman will refuse to look into your case. After all, HMRC says it will stand by IR35 decisions based on an answer provided by CEST, unless it can be proved the client inputted information incorrectly.
If you feel this has happened, it’s vital you’re able to identify exactly how your client has made a mistake when running your contract through CEST.
Tip 4 – Escalate your IR35 case
Let’s say your request to HMRC falls on deaf ears and the taxman has no intention of investigating your case. If, after seeking expert advice, you are confident in your chances of overturning this assessment, the next step is to escalate your case to an IR35 tribunal.
Given the costs of representation can creep up, many contractors choose to take out IR35 insurance, which will cover the expenses involved in fighting your case in court. Certainly, the many complexities of the IR35 legislation mean that the prospect of fighting HMRC alone is a daunting task.
Our Final Tip For Staying Outside IR35 – Professional IR35 representation
It’s no secret that the IR35 legislation is complex, with many grey areas existing when it comes to setting a contractor’s status. Therefore, it’s well worth considering seeking professional representation in the form of an IR35 specialist, who will liaise with your client and HMRC on your behalf.
When focusing on IR35 reform, the road ahead presents a number of challenges to clients in both the public and private sector. However, that’s not to say these businesses won’t be in a position to accurately assess your IR35 status when the changes arrive.
Companies of all sizes increasingly rely on the skills and flexibility of contractors and it seems that, after the chaos which resulted from public sector changes, many private sector firms are keen to avoid similar mistakes. For more information on any of the areas discussed above, feel free to contact the QAccounting team.
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From tax investigations to client disputes and defamation
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