Can contractors do anything to avoid a blanket determination?
Despite the fact that end clients are supposed to demonstrate due diligence when issuing Status Determination Statuses (SDS), we’re still hearing from many contractors telling us that their clients are issuing blanket determinations: placing all of their contractor workforce inside IR35 without an individual assessment of contracts and working practices.
Historically, this has been due to risk aversion, better to place everyone inside rather than make a mistake and end up with the liability. However, under the new legislation, this excuse won’t fly in the long-term since, if the client can’t demonstrate that they used appropriate care, then they could find themselves retaining liability.
However, some end clients aren’t aware of these rules and are continuing to issue blanket determinations believing this is the “safest” way. So, what can you do as a contractor to avoid a blanket determination? We have some tips.
Communicate with your client
In our recent contractor survey, we asked why end clients are not prepared for IR35. The main reasons mentioned were:
- Clients are not aware of the negative repercussions for contractors
- They are not aware of the rules
- They find IR35 overly complicated and so disengage with it
They are focussed on other things.
This is where you can step in. Remind your client that the deadline for having your SDS prepared is fast approaching and it will be here very soon. You should also check that they are, in fact, aware of the changes. If not, make them aware of the impact IR35 will have on you.
You could even point them towards Kingsbridge for support. Remember, your clients are only human and not having your SDS prepared could be a simple oversight, or the result of not knowing what to do so they may well appreciate your input.
Give them the facts
One thing you need to do – which is a bit nerve-wracking – is let your clients know what would happen if you were to be given an inside IR35 determination that you do not feel is an accurate representation of your working practices. Now, you do need to be careful here as you don’t want to appear as if you are threatening your client, while still remaining firm in your stance.
Make sure they understand that an inside IR35 determination may mean that you have to seek an alternative contract elsewhere, or perhaps up your rates to make up for any shortfall.
To avoid sounding threatening, or as if you’re delivering an ultimatum, make it clear that you’re open to working together to ensure your contract and working practices are fairly assessed.
Check your contract
This is something you can do alone or, if you’re coming off the back of earlier communication with your client, you could do it together. You need to go through all of the wording in your contract and ensure nothing in there inadvertently points to you being an employee. You should also check your clauses for points such as right to substitution and payment terms to make sure they all point your client and HMRC towards an outside determination.
Of course, a contract alone is not enough. Your working practices also need to demonstrate that you are outside IR35. For instance, it’s all very well having right to substitution in your contract but if, in reality, you do not have that unfettered right to provide a substitute you could be found to be inside IR35 in an enquiry.
So take a look at the realities of your work with your client as well, and see if there’s anything you need to and are able to change.
Check your status
If you’re worried that your client’s risk aversion could still push them towards a blanket inside IR35 determination, it may be worth getting some outside help. Here’s where Kingsbridge can step in.
The Kingsbridge IR35 Status Tool is our award-winning hybrid tool developed by our Head of Tax, Andy Vessey. Andy has been working with IR35 since its inception in 2000 and has defended more than 500 investigations, most of them successfully – what he doesn’t know about IR35 isn’t worth knowing.
You’ll be asked between 29 and 34 yes/no questions which build up a 360º view of your contract and working practices.
If your case is clear one way or the other, you’ll be issued with an instant inside or outside IR35 determination, including a full report highlighting the strong and weak points of your case. If your result is borderline, it’s passed to one of our in-house IR35 experts for review and they will then issue your determination and report – all for just £50 plus VAT.
While your client still reserves the right to make their own decision regarding your determination, being able to show them our determination and report will give you the ability to bolster their confidence in their decision – and allow them to demonstrate that they’ve taken due care.
With all that in mind…
While you can’t force your client’s hand in terms of your determination, you can help to guide them towards one that works in both of your interests. Of course, the determination has to reflect the reality of your situation, but if there are any points that could cause problems for you, you and your client still have time to iron those out.
So, keep communicating, offer as much help as you can, and guide them towards Kingsbridge for additional support – we’re always happy to help.