IR35 is vague to say the least. It’s also complex and bewildering for most, including some accountants! Although the internet provides a wealth of information on the subject, how do you know whether this information is right, especially when reading from the plethora of forums.
Here are just a selection of the common IR35 mistakes that are made…
I do not know of a substitute?
You may be worried that you do not physically know of anyone who could replace you if you were absent from your contract? In fact, this area falls within the HMRC “checklist” on whether you are inside or outside the scope of IR35.
However, the substitute is purely hypothetical and does not need to be a named person or agreed within the contents of any contract.
The substitute can indeed be another limited company and, as long as you pay for these services, you could source the substitute from an agency or other network. Obviously any substitute must be vetted by your employer and so they will determine whether that person is fit or not.
I’ve worked for more than 24 months in the same contract
This is usually confused with the 24 month rule on claiming expenses on travel to and from your clients place of work. The 24 month rule is not an indication that you are within IR35. However, the longer you do work at the same place, under the same contract, could mean that in HMRC’s opinion you are deemed to be more like an employee.
However, there are no clear cut guidelines on this and as long as you maintain a compliant structure you should be still be outside the scope of IR35
My contract failed an IR35 review
An indicator on whether you are inside or outside IR35 is how you work in practice with your client.
Obviously the contract is a very important document and HMRC will certainly look at this to glean any initials concerns they may have. However, if your working practice differs from your contract and your client can back this up it will put you in good standing.
If your contract is poor then it is still worth getting this altered as soon as possible to avoid any doubt whatsoever.
My contract states the number of hours I must do
This is slightly ambiguous because just working a 9-5 day doesn’t mean you should be employed by your client – in fact, you could argue that, as you need access to the systems and regular staff at your client, it makes better sense to work the same hours as they do.
However, things you should look out for in a contract is whether it states you are entitled to breaks, holiday pay and other benefits normally give to employees of the client.