IR35 specialist Seb Maley answers your questions regarding the contracting profession and the potential pitfalls of the IR35 legislation.
Question: “How will the 24 month rule affect me in terms of IR35? Also, my contract has been extended which will mean I’ve been with the same client for more than 2 years, how will this affect my IR35 status?”
Answer: “There is no connection between the 24 month rule regarding travelling expenses to and from a site and the IR35 legislation. There is a common misconception amongst contractors that working for a client for two years will mean they are automatically caught by IR35. This is incorrect; there is no specific time limit on how long you can provide services for one client.
For more information about the 24 month rule, take a look at the dedicated info page here on our IR35 advice centre.
How might a long contract affect IR35 status?
Whilst a long contract doesn’t automatically make for an inside determination, it is possible that a prolonged engagement could be viewed negatively from an IR35 perspective. This is because a contractor is more likely to become integrated or seen as part and parcel of the end client organisation over a longer engagement.
A contractor appearing to be an integrated part of the end client business could be seen to point to the existence of mutuality of obligation between the parties. Mutuality of obligation is one of the key tests for determining IR35 status, the existence of which can be seen to evidence an inside IR35 engagement.
However, it’s important to note that this is more of concern if you have been contracting full time for the same client for a number of years and not taking any other engagements in between or concurrently.
Working on a longer contract: How to proceed
Here at Qdos, we advise that there is a clear ‘lack of’ mutuality of obligation in your engagement. In other words, try to ensure that each contract has a set end date; provision to terminate; and there is no obligation for the client to offer, or for you to accept, further contracts.
In addition, we would also recommend that independent contractors always identify themselves as such. Whether this be via email signature or having a badge or pass with clear ‘contractor’ identification when interacting with the end client’s own staff or customers.
Each contract should have a defined scope of work distinguishing it from any previous engagement had with the same client. This helps to further strengthen the outside IR35 status of the engagement.
Remember, by ensuring the contract and working practices remain IR35 compliant, the length of time you are with the same client is largely irrelevant. Indeed, we have successfully defended contractors who have provided services at the same place for upwards of five years.
Take a look at our IR35 Advice Centre for further details and a range of free resources.
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