How to get involved in your IR35 status process
Earlier this year, Kingsbridge undertook a survey of contractors, recruiters and end clients to examine the contracting landscape one year on from the IR35 reforms. The results were eye-opening. Did you know, for instance, that 66% of contractors have said they would not so much as consider an inside IR35 role? Or that 70% of end clients have adopted a collaborative approach with recruiters to determine contractors’ IR35 statuses?
One that really surprised us was that 40% of contractors said they were not involved in the process of determining their own IR35 status.
That is a lot of contractors not having a say when it comes to decisions about their own off-payroll working status and, while you can only have so much influence, it can really pay to be involved. So, how do you get involved in your IR35 status assessment?
Decide if you actually want to be involved
First things first, do you actually want to be involved in your status determination? While it can be a good idea, if you’ve already received an outside IR35 determination and you’re happy with it, it’s probably best to leave your end client to it. Why rock the boat, after all?
But, if you have a status you aren’t happy with, or you don’t have complete confidence in your client to make an informed decision, read on to see how you can be involved.
Chat with whoever is creating your SDS
It’s your end client’s responsibility to produce your Status Determination Statement (SDS) so the first thing you need to do is to , who is responsible. What’s key here is to not go in too hard. If you go in shouting the odds it probably won’t go down well, especially as they’re just trying to do their job. You want to maintain a good relationship.
Instead, take a softly-softly approach by asking them if they need to clarify anything with you regarding your contract, and/or how you are to help them to reach an accurate determination. Or, if you have IR35 insurance, it may be helpful to let them know.
By doing this, you’re opening up a dialogue and letting them know they can ask you questions. And once you have that open dialogue, it’s easier for you to ask questions as well.
Ask about their determination process
It’s a good idea to ask what determination process they are using. For instance, if they’re determining your status manually, are they taking into account all of the main IR35 pillars (personal service, mutuality of obligation, right of control) as well as whether or not you’re in business on your own account?
If they’re using an IR35 status tool, you could ask them which one they’re using. Instead you may want to suggest they use an independent tool, such as the one offered by Kingsbridge.
Appeal the decision
If your end client has already presented you with your SDS and you’re not happy with the outcome, you have the right to appeal the decision. Your client is required by HMRC to have an appeals process in place and your client is obliged to respond to you within 45 days. Of course, they do not have to accept your comments but they do have to respond. It’s worth noting, though, that during this 45-day period, your original determination will remain in place.
To appeal your determination, you first need to ask your client about their appeals process. Then, you should clearly outline all of the points of your SDS that you disagree with and give your own opinions as to why you think your status is different. You should refer to all aspects of your contract and working practices that justify your stance.
You should also keep copies of all correspondence in case there is an investigation by HMRC at any point.
If you’re waiting for your SDS, or if you’re not sure the one you’ve been presented with is correct, you could always assess your IR35 status yourself using a hybrid tool such as the Kingsbridge IR35 Status Tool. It is also worth remembering that if, at any time, you are engaged by a small end client, you would have to determine your own IR35 status.
Developed by Andy Vessey, Kingsbridge’s Head of Tax, the tool asks between 29 and 34 carefully crafted yes/no questions to get a rounded view of your IR35 status. This may require speaking to your end client to determine their stance on substitution for example, but a proactive approach, combined with keeping a record of any responses from the client will allow for a reasonable level of surety.
If your status is clear, you’ll get an instant inside or outside IR35 determination with an accompanying report outlining the strengths and weaknesses of your case
If your status is borderline, it will be referred to one of our in-house IR35 experts for a manual review to ensure your status is considered and accurate. Once you have your determination, you can share it with your end client – either to help them reach a decision or as part of an appeal.
You can find out more about the tool and start your status assessment here.