IR35 Pointer Control
We look, in this article, at the IR35 pointer Control.
If the client controls the work of the contractor then IR35 applies.
There are several factors here:-
1. Does the client control what work that the contractor does?
2. Does the client control how the contractor does the work?
3. Does the client control when the work is done?
4. Does the client control where the work is done?
It‘s basically What, How, Where and When. If the contractor is in control of most of these then they are likely to be outside of IR35. That’s if all other things are equal.
If the client
o gives the work to the contractor,
o supervises how it is done,
o when it is done and
o where it is done,
then it is very likely that the contractor is caught by IR35.
If the contractor is in control of none of these, all other things being equal, this is a major pointer towards IR35.
What the Contractor Does
If the client decides what the contractor does and the contractor has no choice then the client controls what the contractor does.
If the contractor can decide whether to do particular pieces of work or not then the contractor is in control of what he or she does.
This would point to him or her being outside IR35.
How the Contractor Works
If the contractor decides how he or she would do the work then he has control of how it is done and he or she is more likely to be outside of IR35.
It would help if the contractor had some skill or knowledge that the permanent staff didn‘t have.
That would mean that the client couldn‘t control how the work was done.
If the Project Manager tells the contractor how he or she wants the work done then the client is in control of how the work is done and that would point towards IR35.
When the Contractor Works
If the contractor does the same number of hours as the permanent staff and is part of a team reporting to a Project Manager, then he or she is likely to be caught by IR35.
However, if the contractor is not supervised as regards doing the work and he uses his or her own PC and/or other equipment and does variable hours, unlike a permanent member of staff, then he or she is not controlled by the client and is likely to be outside IR35.
It is especially good if the contractor makes more money from doing the work early. It’s good if he suffers some financial pain for doing the work over budget. That’s as long as the permanent staff don‘t have the same terms.
Where the Contractor Works
If the contractor has to do the work at the same location as the permanent staff and uses the same equipment as the permanent staff then that is a pointer to IR35.
However, if the contractor can do at least some of the work from home then that would be a pointer that IR35 doesn‘t apply.
Differentiating from Permanent Staff
For IR35 not to apply there has to be some differentiation between how the permanent staff operates and how the contractor operates. That’s as regards to getting and doing the client‘s work.
If a contractor comes in at 9am, is a member of a team just like the permanent staff doing the same work and controlled the same way leaving, just like them, at 5pm then HMRC sees that contractor as really a disguised employee. He is not in business on his or her own account.
HMRC would consider them caught by IR35.
That’s due to the IR35 pointer Control.
IR35 Business Entity Tests
To see if you are at high, medium or low risk of being caught by IR35 take the IR35 Business entity Tests here IR35 Test
Depending on the results of his test you will either need a Limited Company or an Umbrella Company.