IR35

Our IR35 procedures for determining your IR35 status have been produced alter consultation with the Inland Revenue and are based on established tax case law.

If your contracts and working arrangements pass these procedures you will be able to use any of our services. It remains your responsibility, however, to ensure that your relationship with all clients and recruitment companies continues to meet these tests, on an ongoing basis. If there are any changes to your contracts or circumstances you should let us know as soon as possible. So that you are able to do this, please read carefully the general rules and guidelines contained within this sheet.

Guidance and Rules

The 2000 Finance Act and the Welfare Reform and Pensions Act 1999 introduced rules commonly referred to as IR35. Before April 2000 many temporary workers used limited companies and were able to take advantage of various beneficial tax and National Insurance arrangements that were legitimately open to those working through their own limited company. From April 2000 it has been necessary for you to demonstrate that you meet the characteristics of self-employment if you wish to continue to benefit from these fiscal advantages.

The Inland Revenue has indicated that in determining whether or not a particular assignment falls outside IR35 it will consider the following:

• The specific contractual arrangements between client, recruitment company and the company of which you will be a shareholder and employee
• The actual working arrangements between you and your client

The directors of your company will try to negotiate a "Contract for Services" with recruitment companies which includes terms that are clearly indicative of self-employment. However, this contract alone will not take you outside IR35. To be outside IR35 it is necessary for you to be able to show that the working relationship between you and your client would have been one of self-¬employment if you had been working for them directly (i.e. without a limited company and with no recruitment company involved). If this relationship has one or more of the following characteristics you can be comfortable that you are outside IR35 :

• You do not have to do the work personally; the limited company that employs you has the right to send a substitute to the client.
• Clearly the client can refuse the offer of a particular substitute if that substitute is unsatisfactory, but the client's permission is not required before a substitute can be sent. The Revenue may also ask your client to confirm that he accepts that your limited company has this right, and you may find it useful to obtain the client's direct confirmation of this in advance of any such enquiry.
• You can do the work in your own time and/or wherever you choose, and you can decide how you do the work as long as it is completed in accordance with the contract
• You provide significant equipment necessary for the work. This includes providing a vehicle with which you carry out the work such as a lorry or van if you work delivering items to customers. However it does not include the provision of a car to take you to the client's site or between sites

Other factors which indicate self-employment

If none of the above points apply to the relationship you have with your client, you will need to review other factors. This is a more difficult exercise as it involves weighing a number of different elements; if you are unsure of your position you should consider getting professional advice to establish whether you are outside or inside IR35.

If the following factors exist in your relationship with your Client, they are indicative of self-employment – but remember no single factor on its own decides the case:

• The work to be performed for the client is specific and the scope of the work is set down in the contract. The client has no right to direct you to do other work
• You take on financial risk whilst working in that any problems caused by your negligence will be corrected in your own time and at your own cost
• Between contracts or in your own time you have incurred expenditure on training. This is an investment in your business, which an employee does not have to make
• You have the opportunity to profit from the sound management of your business. If you work efficiently and effectively you can enhance your reputation in the market place and so negotiate an increase in your future rates of pay
• You may be told when and where the work is to be carried out (generally for practical reasons such as access to equipment and people and for security and confidentiality reasons) and the client can determine what work is to be done, but the client cannot tell you how to do the work
• You carry out a number of engagements at the same time as the present engagement
• You have several short engagements with different clients in succession
• You are in business on your own account - you have an office at home, you have your own business cards and stationery; you actively seek contracts with clients
• You and the client clearly do not intend that you should be an employee of the client's business
• You do not receive any employee-type benefits from the client e.g. sick pay, holiday pay or pension contributions

In addition, the following more minor pointers are useful indicators that you are not integrated within your client's business:

• Sign into the Visitors Book each day
• Obtain a Contractor or Visitor Pass, not a "staff pass"
• Only attend employee social functions only as a guest
• Always introduce yourself as an independent consultant in the name of your company
• Always offer advice as an independent consultant, both oral and written
• Remember that you are an employee of your company not the recruitment company or client
• Remember that it is possible for one assignment to be outside IR35 but for the next to be inside. Thus each time you change contracts, or at periodic intervals, we will ask you to complete the application questionnaire again

By signing the application form you confirm that you have answered the questions accurately to the best of your knowledge and belief. If we believe, based on your answers that you fall outside of IR35 it is still your responsibility to ensure that your relationship with this and future clients also meets the self-employment tests and to inform us if your circumstances change.