What happens if a client doesn’t assess my IR35 status?
One of the issues some contractors have had with the new IR35 legislation stems from the idea of handing over their statstus determination to a third party, with the end client taking responsibility for issuing the Status Determination Statement (SDS) in most cases. It can also cause no small degree of anxiety if you’re waiting for that SDS to come through and the client just isn’t getting it done.
What can be done in those circumstances? Well, first of all, you need to check if the responsibility to assess your status definitely does lie with your client or if you are still the one responsible for that. So, how do you do just that?
Are you working for an overseas client?
The first question to ask yourself is whether or not you’re working for an overseas client. If your client is based outside the UK then IR35 may not apply, although you’ll need to check some particulars as it’s not as straightforward as saying IR35 doesn’t apply if the client is overseas.
Well, when is anything to do with IR35 ever straightforward? For instance, if your end client has a branch in the UK – even if it’s tiny – then the offshore branch you are engaged with would still have to assess your IR35 status. However, if they have absolutely no connection to the UK then the responsibility for assessing IR35 status still lies with you. Additionally, if you are a non-UK resident by virtue of the Statutory Residence Test, then IR35 rules also do not apply.
Is your client a small business?
What a lot of contractors don’t initially realise about the new IR35 legislation is that it only applies to medium and large businesses. If your client is a small business, then you continue to abide by the same IR35 rules as before: you are responsible for your status determination and hold all tax liability. But what does HMRC consider to be a small business? To be determined as a small business, your client must satisfy at least two of the below criteria:
- An annual turnover of not more than £10.2 million;
- Not more than £5.1 million on their balance sheet;
- Not more than an average of 50 employees during the tax year.
If your client is part of a group of companies, then the parent organisation must also be small for the categorisation to be effective.
What if neither of the above apply?
If your client is actually a medium or large business based in the UK, then they are most definitely responsible for assessing your IR35 status and issuing your SDS. Your fee payer (usually your end client, recruiter, or agent) then holds tax liability. If this is the case but you have still not received an SDS from your client then you should consider contacting them to remind them of their obligations.
Until they have issued your SDS, liability sits with them (regardless of whether or not they’re the fee payer) so it is in their interest to get it organised sooner rather than later.
Consider reviewing your own IR35 status
If your client is planning on assessing your status and just hasn’t got round to it yet, it might be worth prompting them by assessing your status yourself to show them the results. A tool such as the Kingsbridge IR35 Status Tool can help with this for just £50 plus VAT. Designed by Kingsbridge’s Head of Tax, Andy Vessey, it allows you to answer 29-34 carefully crafted yes/no questions about your contract and working practices to get a rounded view of your status. It will then issue you with an inside or outside IR35 status determination along with a comprehensive report outlining the strengths and weaknesses of the engagement.
If your determination is borderline, it’s passed to one of our (human) IR35 experts to assess manually. Being able to show your client an accurate, confident assessment will help them out no end.
In addition to this, you could also look into IR35 insurance such as IR35 Protect by Kingsbridge, which flexes to cover whoever holds the tax liability in any given engagement, whether that’s you, the end client or your recruiter, giving your client some extra confidence that they’re protected against risk. If you opt for the Premium package, it even includes unlimited access to the Kingsbridge IR35 Status Tool.
If you’d like to speak to our team about the Status Tool or IR35 Protect, you can get in touch here.