With the new legislation for the private sector to be implemented in April 2021, we want to ensure that neither you nor your candidates get caught in the IR35 trap. These tips will also apply to any contractors currently working within the public sector.
As you already know, remaining outside IR35 revolves around three main questions:
- Does the end client have control over the contractor?
- The end client should not be dictating what work the contractor undertakes and how they go about it.
- Is the contractor able to send a substitute to carry out the work?
- The following should be considered: the client’s agreement to substitution (usually a clause inserted into the contract), the contractor must pay for the substitute, and the client has no vetting control over the replacement.
3 Mutuality of obligation
- Does the end client have to provide work, and is the contractor obliged to accept and complete the work?
But part and parcel of all those questions is another one:
4 Is the contractor part and parcel of the client’s organisation?
The following situations may not have crossed your mind:
- The contractor should not be given a security pass to enter the client’s premises. They should always need to sign in and out.
- No uniform should be worn.
- The contractor should not be driving around in a vehicle which advertises the client’s business.
- The contractor should not use the client’s canteen which their employees use.
- The contractor should use their own equipment.
- No shared car rides with other employees.
- The contractor should not be added to the client’s telephone directory.
- The contractor should not have business cards associated with the client.
Even just one of the above points being present can sway HMRC to class the contractor as an employee.
We suggest that well in advance of April 2021 you audit your contractors and assignments, to ensure that neither you nor your contractors get caught out. If you place 12 month assignments, you will need to implement changes by April 2020 to avoid issues when April 2021 comes round.
We suggest you ensure you audit the correct status of each assignment using the numbered points above. When you audit a contractor, he or she will either be a limited company, working through an umbrella company, a self-employed sole trader, or an agency worker receiving PAYE. You will find that the assignments are either inside IR35, outside IR35 or borderline.
Our advice is that you focus on those borderline assignments and contractors well in advance of April 2021.
If you need further advice on the IR35 status of an assignment or contractor, or you need your terms of business brought up to date, please contact Francesca Damario at firstname.lastname@example.org or call 0333 400 4499.