How to stay “outside IR35”
What you should and shouldn’t do to protect yourself from IR35
What is IR35?
IR35 is a piece of tax legislation that determines if you are a ‘disguised employee’ or a legitimate service company.
The legislation was introduced to stop tax avoidance.
If you’re a contractor then you need to ensure you’re ‘outside IR35’. Otherwise, if HMRC decides to investigate you then it could be very costly!
How to stay ‘outside IR35’
Firstly, a professional should review your contract.
Secondly, get IR35 insurance to protect yourself.
Insurance will cover any court costs and legal fees if HMRC decides to take you to court.
Lastly, make sure you don’t do anything to jeopardise your position.
Here are some things you should not do:
- Accept any benefits like; paid holiday, pension, training or health insurance.
- Stay working for a client for too long – 12 months is my limit
- Work as a Contractor for a client that you have previously worked permanently
- Be managed – you should not be controlled
- Gain HMRC’s attention. Ie. pay your taxes on time.
Here are some things you should do:
- Substitute yourself – can you replace yourself with another person?
- Take out business indemnity insurance – this shows you operate as a business
- Have more than one client at a time – shows you are acting as a service company
- Use your own equipment eg. Laptop, phone etc.
- Work from various locations – don’t just work from the clients’ offices.
- Agree to deliverables as part of your contract with dates and deadlines
- Avoid ‘mutuality of obligation’ – your client shouldn’t feel obliged to give you work
In summary, you need to control how, where and when the work is done.
Fortunately, there are ways you can protect yourself.
Qdos are there for you, from IR35 insurance to IR35 contract reviews and evaluating working practices. Don’t let vague and confusing tax legislation jeopardise all your hard work. Get the protection your business deserves.
Qdos review all my contracts and do a quarterly assessment to ensure my working circumstances haven’t changed. On top of this, they also protect me with IR35 insurance. I do this because they understand the legislation, and I don’t.