Why Juanita is Borderline IR35

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Borderline IR35
Borderline IR35

Borderline IR35

Here is a case of a borderline IR35 verdict.

The sole director, worker and shareholder of J Ltd is Juanita who contracts through an agency who has a contract with the end client.

Juanita has been 8 years with the same client with contracts lasting 6 to 12 months. She hasn‘t worked for any other client during that time.

She charges by the hour and invoices monthly.

She has a contract saying she can send a substitute. However, she has never done so in all the eight years and the client would probably not have accepted one.

Client Control

The client has very little control over how Juanita works.

It tells here the project scope and when it is to be delivered.

The client supplies all the equipment.

However, she gets no employment benefits from the client.

She has a room set aside as an office at home. She spends one or two hours a week, therefore, working on the project from home.

Mentors Permanenent Staff

She is part of a team but sometimes mentors permanent staff.

She has to make good any mistakes and has an ISO certificate which includes indemnity insurance.

She has invested in training and pays for accountancy services and advice.

She would have to get notice from the end client.

Why Juanita is borderline IR35

1. Personal Service

Although she has a substitute clause in her contract, and that is important, the end client would probably not accept one and that points to IR35.

2. Direction and Control

Juanita is told what to do by the end client but it is not clear if they can tell her when to do it.

She does some work from home but so do some employees.

HMRC would need to know more info on this case.

Other Factors

Being provided by the client with specialist equipment is a weak pointer to IR35.

Mentoring the client‘s employees is something that contractors sometimes do. However, it points to Juanita being a part of the company and therefore is a weak pointer to IR35.

She does not get any employee benefits so this is a weak pointer to her being outside IR35.

She invoices for work done which employees don‘t do. However, HMRC would need to know if there is any financial risk to her in the arrangement.

HMRC would have to find out more before they could determine if IR35 applied.

They would need to know more about the amount of control that the client had on her in terms of her work.

ITContractor.com Comment

It does seem a little strange that if you help the permies that exposes you to being caught by IR35.

One would expect that if you are bringing in skills and knowledge obtained at one of your clients and gained outside the organisation that would set you apart a little.

Also not getting any benefits like sick pay, holidays, pension, paid days off etc. should surely not qualify as a ‘slight pointer‘ to being outside the organisation and not caught by IR35.

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