IR35 Compliance – Keeping Your Contract outside IR35

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Government IR35 Rules - IR35 Compliance
Government IR35 Rules - IR35 Compliance

IR35 Compliance

The secret to IR35 Compliance is to have as many different working practices from the permanent staff at your client as you can. Not only should your contract show that you are working in a much different way to employees of your client but that your working practices are very different too.

If your working practices are similar to those of permanent employees then it doesn’t matter what your contract says.

However, having a contract that is ‘IR35 free’ is the first step to IR35 Compliance.

Right of Substitution – IR35 Compliance

For IR35 Compliance, make sure that you have a Substitution Clause in your contract. It may be the case that if you ever tried to impose a substitute on a client they may well refuse. However, you seldom, if ever, would need to. HMRC were left frothing at the mouth in a recent case where the judge decided that they would have had to prove that a substitute couldn’t be used to make that clause in the contract invalid.

See Right of Substitution for further details.

Control

For IR35 Compliance it is crucial that you control your own work and the way you do it rather than being supervised or being shown how to do it by someone at the client’s company. It is important that it states in the contract that you will be deciding how you do the work. It is also important, for IR35 compliance, that this is carried out in practice otherwise this clause in your contract will be voided by any judge.

See Control as an IR35 Factor for further information.

Mutuality of Obligation – IR35 Compliance

This is where there is an obligation for the client to give you work, for you to do it and for them to pay you for it. This is how a permanent employee operates. For IR35 Compliance you must differentiate yourself from them as much as possible.

There must be no clauses in the contract that show any Mutuality of obligation. Indeed you can go further and state in the contract that there is no Mutuality of Obligation.

For a more detailed analysis see Mutuality of Obligation

Non-Standard Contract

For IR35 Compliance make sure that you don’t have a standard contract that you use for every contract. Tailor it for each contract.

Other Contract Issues

Other issues that must be addressed in your contract for the sake of IR35 Compliance are:-

1. Basis of Payment

2. Part and Parcel of the Organisation

3. Provision of Equipment

4. Employee Benefits

5. Opportunity to Benefit from Sound Management

6. Financial Risk

7. Intention of the Parties

8. Length of Engagement

9. Right of Dismissal

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