Changes in HMRC IR35 guidance on Standard Contracts

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HMRC IR35 Guidance on Standard Contracts

HMRC have made a change to 4 areas of their IR35 guidance and one of them is in the area of Standard Contracts. They have a bugbear about contractors signing standard contracts with agencies.

Here is their new HMRC IR35 guidance on Standard Contracts.

They say “a lot of the discussion at the meetings was concerned with the need for service company workers to be able to decide with certainty whether the legislation would apply to them.

“It was also clear from the discussion that in fact a large proportion of consultants are engaged through agencies on standard contract terms, which contain most of the pointers to employment status listed in the paper.

IR35 Factors

“To provide certainty for this group, the article makes clear that we will treat any engagement of one month or more on these standard contract terms as meeting the definition of employment, unless the worker can demonstrate a recent history of work including engagements which have the characteristics of self-employment.

“Contracts of less than a month, and cases where there is a pattern of other work, will be looked at on a case-by-case basis”.

Wow!

IR35

They are basically saying that anyone who signs an agency’s standard contract is going to be treated as if they were in a contract of employment.

That’s astonishing!

How can they say this is a minor change in HMRC IR35 guidance?

If a contractor signs a standard agency contract the burden of proof is now with them to prove that they are not caught by IR35.

HMRC are saying that their assumption, unless proved otherwise, is that the contract is caught by IR35.

HMRC IR35 Guidance

IR35 has come a long way since it was set up to catch people who left a company on a Friday and started again on a Monday – and yet, except for the minor change for Controlling Persons, the law hasn’t been changed since its inception in 1999.

It’s getting harder and harder day by day for contractors to be able to get themselves taxed as contractors – and that, presumably, is the Government’s and HMRC’s objective.

See Which Contractor Accountant? for a review of some good contractor accountants.

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