IR35 Control – Freelancer v Employee – 7 Ways to Differentiate

IR35 Control
IR35 Control and the Freelancer

IR35 Control


IR35 Control is one of the three major IR35 factors along with the right of substitution and Mutuality of Obligation.

It is mainly about differentiating a freelancer’s working practices with that of an employee.

There are two parts to IR35 Control:-

1.  What is in the Contract

2.  The actual working practices of the freelancer

If the second is diametrically different from the first, the second may override the latter in a judge’s eyes.

7 Factors Differentiating Between a Freelancer and an Employee

There are seven different aspects to IR35 control which differentiate between a freelancer and an employee:-

1.  A person in control tells an employee what to, i.e. a controlling person. The freelancer makes the decision as to what they need to do after an overall outline from a client, as to what they need. The freelancer then does it.

It is a customer / supplier relationship in which the ‘customer’ orders something and the ‘supplier’ supplies it. It is a partnership of equals.

2.  A freelancer decides how they should do a task whereas an employer tells an employee how to do it. There is not any control of how the freelancer does the task.

3.  The employee is supervised while doing the task whereas the freelancer supervises his, or herself. There is no control over how the freelancer does it.

4.  An employer tells an employee how long the task should take and the employee will attempt to do it within that timeframe. The freelancer negotiates a timeframe with the client. The estimate is a partnership of equals between a customer and a supplier. The freelancer should minute the original estimate. They and the customer should agree the estimate, minute it and sign it off.

Agreement on Task Between Contractor and Client

5.  The company will decide where an employee does the task, whereas the freelancers and client will agree between them where the freelancer should do the task. It may be at the client’s premises or at the freelancer’s home office. They will work this out after negotiation. The freelancer should minute the agreement after the negotiation and sign it off with the client.

6.  An employer tells an employee which equipment to use. The freelancer negotiates which equipment is best to use with the client to complete the taks and signs off an agreement. It may be best to do it on the client’s equipment or the freelancer’s PC or a mixture of both. This should agree this, though, between two equal partners, and then sign it off.

7.  The Employee’s place in the hierarchy will show up on the company Hierarchy Chart. The Freelancer will not as he, or she, is not part of the organisation. There should be no control of the client over the freelancer apparent on the chart.

It would be even better if there was a bubble diagram showing an East / West relationship between freelancer and client showing, also, a customer / supplier relationship and what each has to supply each other with. There should be sign-off to show that this is the relationship and not one of control.

Contract for Services

IR35 is all about differentiating between the working practices of a freelancer, who is an equal partner in a customer / supplier arrangement, and that of an employee of an organisation, who is an integral part of the organisation and told what to do.

Indeed, it would be a great idea for the freelancer to have an agreement documenting the exact relationship, as above, sign it off with the client, and use this is a basis for his, or her, working practices.

If they do this then they have one of the three major IR35 factors in the bag.

There is no reason why any reasonable client should not sign off on something based on the above.

This shows that it is a contract for service, between the two equal parties, rather than a contract of service between a company and its employee.

This is an agreement between the customer and supplier as to what the freelancer will supply the customer with and the freelancer will decide how he, or she, should supply it.

Let’s have a bash then at creating an agreement that the freelancers and the client could sign off on.

Freelancer / Client Agreement

1.  The client will tell the freelancer what they want and the freelancer will decide how to best supply it after agreement with the client.

2.  The freelancer will decide what steps are best to take to supply what the client wants after agreement with the client.

3.  The freelancer will be supervise ,himslef, or herself while supplying what the client needs but will provide information on progress on the task to the client on a regular basis on a timescale they agree.

4.  How long the task will take will be determined by negotiation between the client and the freelancer. There may be an initial estimate showing how long the client expects the task will take but this may, or may not, be amended after negotiation and agreement between the freelancer and the client.

5.  Where the task or tasks will be best performed to supply the product or service to the client will be determined after agreement between the client and the freelancer.

6, Which equipment to use to best perform the task, e.g. the client’s or freelancer’s equipment, or a mixture of the two, will be agreed after negotiation between the freelancer and the client.

7.  The above agreement, which will include a bubble chart, showing what should be supplied by bothe parties and delivered by both parties, should be included in any agreement.

  1. After agreement between the two parties, the agreement should be documented and signed off by both parties and this should be the basis of how the client is to be supplied with what he, or she, wants by the freelancer and when it should be supplied.

Basis of Agreement Between Freelancer and Client

There you are now.

You could print that off and ask your client if this could be the basis of how you supply your services to the client.

Any reasonable client should be happy enough to agree this, especially as this is how most contractors operate anyway.

However, it is now down in black and white and you are covered if ever HMRC pursue you over IR35.

You now have IR35 Control  covered.

IR35 Insurance for Contractors

To find out more about how to insure yourself against an IR35 investigation, which could take years, and potentially cost you tens of thousands in back taxes, you should click on IR35 Insurance for Contractors

It doesn’t cost too much and you can sleep more easily in your bed at night.



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