There are many factors which determine if you are inside of IR35 or not. However, the three main IR35 factors are:-
1. The right of substitution – the right to be able to name a substitute to work in your place
2. Supervision, Direction and Control – whether contractors work mainly under their own supervision and control or that of the client
3. Mutuality of Obligation – whether there is an obligation for the contractor to do the work and the client to pay them for the work
Further IR35 factors are:-
1. Financial Risk – whether there is financial risk to the contractor or not
2. The length of engagement The longer the engagement by the client of the contractor the more likely it falls under IR35
3. The right of dismissal –
4. Basis of Payment – How you are paid
5. Part and Parcel of the Organisation – The level of integration
6. Provision of equipment – whether or not you provide your own equipment
7. Employee Benefits – Whether you get any benefits that the employees get
8. Whether you have the opportunity to benefit from sound management
9. The Intention of the parties – was it the intention to have a contract of employment or a contract for services.
IR35 Compliant Contracts
You don’t, therefore, have to tick all of these boxes to be outside IR35. However, the more that you can tick the better. So, you should have as many provisions in your contract as possible that take you outside IR35.
However, of even greater importance is the way you operate. You must differentiate your way of working as much as possible from that of an employee of the organisations. As far as HMRC and the Government are concerned if it looks like a duck and it walks like a duck and it quacks like a duck, it’s a duck. That’s no matter that it says in its contract that it is a goose.
So, these are the major IR35 factors and the minor IR35 factors. You do not need to tick all of the boxes as regards the IR35 factors. However, the more you can tick positively the better.
IR35 Risk Factors
As IR35 can potentially affect all contractors why not bookmark this page. You can, therefore, have a look each time you get a new contract.
Also, if you are an Accountant or Umbrella Company why not put a link to this page for the benefit of your contractors.
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