Compliant Contracts and Working Hours: Ask Andy Answers
Are you wondering whether remaining with a client long-term might bring a HMRC investigation to your door? Maybe you’re concerned that the number of hours you work for a client in a week might be a red flag. Or perhaps you’re worried that your recruiter’s IR35-proof contract may not be as compliant as they suggest.
Whatever your IR35 question, Kingsbridge’s Head of Tax, Andy Vessey, has the answers. Andy has 20 years of experience successfully defending IR35 cases against HMRC and what he doesn’t know about IR35 isn’t worth knowing. We’ve published some answers to the most recent questions sent in to him here.
Is staying in the same contract for a third year with a client effectively a red rag to the bull with regards HMRC and IR35?
Length of engagement in itself is not a decisive factor in deciding employment status. However, the longer the contract then the more likely that mutual obligations exist between end client and contractor. HMRC will also seek to argue that the longer the engagement, the more likely that the engager will want or need to exert significant amounts of control over a worker. Furthermore, the contractor might also start to look like part of the furniture. Having said that, if the end client has insufficient degree of control over the worker, there is an absence of personal service (e.g., a genuine right of substitution), coupled with other things, then entering into a third-year extension should not be discouraged.
A few years ago, I defended a contractor, during an IR35 enquiry, who was working for the MoD for many years (more than three). While it took some time to persuade HMRC, and we eventually had to list an appeal for hearing before the First-tier Tax Tribunal, the Revenue eventually backed down.
I currently work 40 hours per week for the same client. When completing the CEST tool it is a little unclear whether I would be inside or outside. If I worked for more than one client would that give more weight to being outside IR35?
Working time is only one aspect of the control test, as there are four components in total and it may be that other areas of the test point towards self-employment. Rather than using CEST, consider running your arrangements through one of the other online tools such as the Kingsbridge tool, which will give you a clearer picture and understanding of your IR35 position, and any borderline results will be manually reviewed by our expert IR35 consultancy team.
Right of control is only one employment status test among many others to consider, so it is necessary to examine each one in turn and then stand back to determine whether you are looking at a bone fide self-employed worker or a disguised employee.
Working for another client might help, but it depends on what percentage of your company’s turnover that work will generate and the time devoted to such work. If both time and fees are significant, then this will help demonstrate you are in business on your own account and that your current contract is not an exclusive one.
Over the last year or so, the agencies through which I have been awarded contracts have consistently said that their contacts are 100% outside IR35 and compliant with HMRC. Can I really take their word for it or should I be seeking an independent view?
IR35-proof contracts have been around for nearly as long as the legislation itself and have no value if they do not truly reflect the working practices. Needless to say, HMRC don’t like them one bit.
IR35 requires an examination not only of the contractual arrangement but also, and often more importantly, the working practices. Currently, your PSC is obligated to self-assess the IR35 status of the whole arrangement and, therefore, to carry out your own due diligence. You may wish to consider having a full contract and working practices review carried out by an IR35 specialist, such as Kingsbridge, who will give you an expert and independent opinion of your IR35 status.
How to Ask Andy…
Asking Andy your IR35 question couldn’t be easier. Simply complete our online form and you’re away. He will do his best to answer as many as he can, and answers will be published (confidentially, of course) on our blog.
In the meantime, you should also make sure you’re preparing for the IR35 private sector reforms, so that you’re ready for the changes on 6th April 2021. One of the things you should be looking at is IR35 insurance cover, such as Kingsbridge’s IR35 Protect. This will give you peace of mind and protect everyone in your contractor supply chain. Our cover even includes IR35 status reviews, so that you can have confidence in your client’s status determination.