{"id":3433,"date":"2018-06-08T10:00:51","date_gmt":"2018-06-08T10:00:51","guid":{"rendered":"http:\/\/my-brains.co.uk\/jackross\/?p=3433"},"modified":"2018-06-01T09:04:42","modified_gmt":"2018-06-01T09:04:42","slug":"understanding-ir35","status":"publish","type":"post","link":"https:\/\/my-brains.co.uk\/jackross\/understanding-ir35\/","title":{"rendered":"Understanding IR35"},"content":{"rendered":"

A brief guide to the tax implications of IR35<\/span><\/h3>\n

IR35 is the shorthand name for tax rules concerning the provision of personal services through intermediaries.<\/p>\n

These rules came into effect on 6 April 2000, but they were significantly amended from 6 April 2017 for contracts involving public sector bodies.<\/p>\n

There are now two different applications of IR35 \u2013 for the private sector, and for the public sector. HMRC also refers to circumstances which may fall within IR35 as \u201coff-payroll working\u201d.<\/p>\n

The Revenue is currently consulting on how to change the way IR35 is applied in the private sector, to align with the public sector rules.<\/p>\n

These changes are likely to take effect from 6 April 2019, but that commencement date is not certain.<\/p>\n

When does IR35 apply?\u00a0<\/span><\/h3>\n

IR35 may apply when you provide personal services to your customer through an intermediary.<\/p>\n

This is usually a company which you control, but the intermediary could be a partnership or another individual acting as an agent.<\/p>\n

There may be more than one intermediary in the chain between you and your customer, such as one or more employment agencies.<\/p>\n

The law requires you to imagine that you are working directly for your customer, ignoring the intermediaries in the chain.<\/p>\n

Looking at the responsibilities and obligations under the hypothetical contract between you and your customer, would you be classified as an employee of your customer?<\/p>\n

If your relationship with your customer looks like employee and employer for income tax purposes, then IR35 applies.<\/p>\n

If the relationship looks like a self-employed contractor and a customer, then IR35 doesn\u2019t apply.<\/p>\n

IR35 is a contract-by-contract test, so you may have different relationships with different customers.<\/p>\n

How to test for IR35<\/span><\/h3>\n

There is no single test for being outside IR35. It\u2019s a combination of factors which, if looked at overall, show you operate as a self-employed individual rather than an employee.<\/p>\n

You may be a director and an employee of your own company, but that\u2019s irrelevant for testing your status for IR35.<\/p>\n

The questions to ask in relation to your contract with your customer are:<\/p>\n

What are the obligations of both parties?<\/span><\/h3>\n

Employers have an obligation to provide continuing work for the worker, and to pay the worker even if there is no work. The employee has an obligation to perform the work. This is referred to as a mutuality of obligation.<\/p>\n

In a self-employed relationship, there is no continuing obligation on either side to offer work or perform the tasks.<\/p>\n

If you can decide from one small project to the next whether to accept the work and your customer can decide whether to offer you work or not, there\u2019s no mutuality of obligation.<\/p>\n

Are you in business on your own account?<\/span><\/h3>\n

Do you have benefits and responsibilities similar to an employee, such as sick pay, holiday pay, reserved parking place, rights of dismissal or responsibility for other employees?<\/p>\n

If you have several different customers, particularly concurrently, this is a good indicator of self-employment.<\/p>\n

Do you have the right to send a substitute?<\/span><\/h3>\n

This is a crucial test. You don\u2019t actually have to send a substitute to perform the work, but you should have the right to send someone of equal competence, although your customer can have the right to veto your choice of substitute.<\/p>\n

Can you hire others to help you?<\/span><\/h3>\n

If you are not providing a personal service you are not within IR35.<\/p>\n

Do you take on financial risk?<\/span><\/h3>\n

This can be indicated by:<\/p>\n