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IR35 Rules explained (original June 2019)

10 - 03 - 2021

With more focus on IR35 rule and off payroll working, our advice note from June 2019, explains the rules.

IR35 – Explained

 

What is IR35?

 

The Intermediaries Legislation, the document known as Inland Revenue 35, which is referred to by HMRC as IR35, is intended to distinguish between workers who are self employed and employed.

 

 

Do I fall under IR35?

 

There is no simple way to answer this question.

 

There is no scorecard or point system to see if you meet the required legislation each assignment needs to be assessed individually.

 

 

Am I employed or self employed?

 

It is important to assess your status, are you employed or self employed?

 

If there is a golden rule to being self employed, it would be to “keep your identity separate from your client”.

 

In other words: protect your brand; separate your business interests from those of your client; never allow yourself to become part and parcel of the client’s operation; make your own decisions about how the assignment is to be completed. You are your own business, your own boss, and you have to stay that way at all times or accept “employee status” and pay income tax under the PAYE scheme and National Insurance accordingly.

 

 

Ways in which you can help to justify your self employed status are as follows:

 

1. You work on the client site for your own Limited company;
2. You may quote to complete the work, negotiate rates or offer fixed pricing for the contract. The pricing distinguishes you from an employee who is paid wages and indicates that this type of work can pose a financial risk to you;
3. You organise your own workload and decide what tasks will be completed first;
4. You use your own tools, specialist equipment and other expensive assets;
5. You wear your own business uniform and provide your own Personal Protective Equipment (unless it does not meet the clients regulations) as opposed to employees who are provided with their equipment;
6. Your  contract  is short term and there may be uncertainty of how long you will be on any site;
7. You may work for more than one client at any one time;
8. You have the right to send a substitute to complete the work on your behalf;
9. You are not entitled to the same benefits as the employed staff from your client, i.e.: Holiday pay or Pension Scheme.

 

 

 

 

 

 

Are you using your own tools?

 

The more complex area concerns an engagement where the client provides substantial equipment for the worker to use. This is by no means fatal to the self employed status but may lead to HMRC asking questions about the Limited Company such as:

           

• Could the worker have provided the equipment used on site?
• Did it make commercial sense for the client to provide the used equipment to the worker?
• Is the equipment specialised?

 

The most important element is the surrounding circumstances on each particular engagement.

 

HMRC IR35 investigations tend to only scrutinise Limited Companies where the duration of activity is significant.

 

 

What should I do if I am unsure of my status?

 

Should you have any concerns regarding IR35 then please contact us at Foremans to discuss your issues further. Foremans can also offer an IR35 review of your contract*.

 

*An IR35 Review is free of charge for clients who have selected our Premium Package.

 

 

If you would like to discuss any of the issues noted above please contact us on:

 

01244 625 500 or 01978 364 000

contactus@foremansllp.com

 

Whilst all due care and attention has been taken in the preparation of these notes no liability

can be accepted for any omission or item contained therein.

 

Foremans LLP

June 2019