IR35 – The Importance of a Working Practices Review

The written terms and conditions of the contract are also important and this article is in no way playing down of the importance of an IR35 friendly contract. However, should you be unfortunate enough to be subject to an IR35 enquiry, HMRC will look closely into your working relationship with the end client.

HMRC will look to establish whether or not the relationship between the contractor and the end client is a business to business arrangement. It is essential to ensure that you are not acting as though you are part and parcel of the clients hierarchy, e.g. not treated the same as employees of the client.

It is essential to demonstrate that the client has engaged the services of the contractor to provide a specialist service and that you have autonomy over the way the services are provided. To use an analogy that is often used; should you need the services of a plumber, you will contact the plumber, show the plumber what needs to be fixed, the plumber is then left to carry out the services using his own working methods. This is how the relationship between the contractor and the end client should be.

The written contract between the contractor and the end client could be perfect in terms of IR35, demonstrating key areas such as substitution, control, non-exclusivity and mutuality of obligation. This will also need to be proven in practice. A point raised regularly here is; “The need to provide a substitute has never arisen, ”. It is very unlikely that you will need to provide a substitute, however it is vital that you are able to demonstrate that ‘should the need arise’, you have the right to provide a substitute and also reasonable control over this. The client should only be able to refuse a substitute on reasonable grounds such as insufficient qualifications or experience. Just to have confirmation of this in the written contract is not enough, as HMRC will want to establish whether this right would be allowed in practice. If it is possible for the client to give written confirmation of this in an email, then this would be very useful.

In an ideal world, we would like an IR35 friendly contract with the working relationship with the client mirroring it.

At the cost of £30 plus VAT, we are able to provide an IR35 Working Practices Review with recommendations on how to improve your working arrangements. Please click here to download our IR35 Working Practices Questionnaire. Once this is completed, please email this to contracts@qdoscontractor.com and we will review this for you. Alternatively, a Working Practices Review can be bought online.

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By:Sam Greenwell

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