Advice for Contractors (courtesy of the Special Commissioner)
Outside IR35 – Here are the pointers for ordinary contractors, that the Special Commissioner considers helps their case for being outside IR35. They come out of the Lime-IT case.
1) If you vary your hours instead of working the standard week, that will help greatly to be outside IR35.
Try to work a different number of hours than the company’s standard week as much as possible. Employees work the standard week.
2) Make sure that when you have a contract that it states the services that you will provide and the tasks that you will be doing.
This makes you different from an employee, according to the Special Commissioner. A company can’t make you do anything that is outside the terms of your contract, like they could an employee of theirs.
Contract for 6 Months
3) When you have a contract for six months, make sure that it states that this is just an estimate for the work. Try and make sure that you don’t leave on exactly the end date.
Lisa’s contract was terminated a week early and that helped to show that the year’s contract was just an estimate. Employers can’t do this with their employees. That helped show she was outside IR35.
4) If you renew the contract, make sure that you state explicitly what work the new contract is for.
Hopefully, it will be at least slightly different from the work you did as it states on your initial contract.
Have a Substitution Clause in Your Contract
5) You pretty much have to have a substitution clause, i.e. that you can get somebody else to step in to do your work for you.
However, you can also stipulate that the end-employer has the right of refusal on whoever you might send as a substitute.
It’s unlikely that they will ever trigger this, but the court and the HMRC have to assume good faith. That it would, therefore, happen if ever there was a need.
6) Set up your own web site, marketing yourself to local businesses. Disguised employees seldom do this, but small businesses do. That would help shw you were outside IR35.
7) Make sure that you have an office set up elsewhere with a desk, a computer, and a separate phone, even if it is just part of your house to be outside IR35.
Pay For Your Own Travel Between Sites
8) Pay for your own travel between the different sites of your clients to show you are outside IR35.. Employees never do that, but small businesses do. You can set it off againts tax.
9) Try to do something specific for a client and different from employees of the company. It doesn’t look good to be part of a team doing exactly the same as the permanent employees (although this can’t always be done).
10) If you have to wear a badge at work, make sure that it has your company name on it as well as your name, and that it says you are a contractor to be sure that you are outside IR35.
11) Make sure that your phone number in the internal directory names your company as well as yourself (which it wouldn’t do for employees).
Use Your Company Name in Email Address
12) Make sure that the email address that they give you at work has your company name in it, and not just your own name.
13) If contractors are not able to use the sports facilities at a client’s, don’t ask for special permission. Not being able to use the facilities differentiates you from an employee. You don’t want this to put you outside IR35.
14) The fact that you don’t get holiday pay or sickness benefit will help differentiate you from an employee in the eyes of the Special Commissioner, and now the Inland Revenue.
Use Your Own Personal Computer
15) To show you are outside IR35, use your own computer at your client’s site if you can, rather than your client’s. Even if you have to use your clients PC most of the time, use your own for some of the time, e.g. for documents. An employee wouldn’t be expected to buy their own computer equipment.
16) If your agency ever doesn’t pay you on time, kick up a stink about it by writing a letter to them to show you are outside IR35. They have to pay within 10 days by law. Employees always get paid on time, small businesses sometimes have trouble getting paid.
Have Your Own Company Business Cards
17) Make sure you have your own business cards. Employees don’t have their own business cards, merely their company’s. They don’t cost much.
18) Make sure that you charge VAT, and have it stated in the contract, even if you are not above the threshold. Employees never charge VAT – only businesses.
Showing you are outside IR35 is not an easy business but if you follow these pointers, you are far more likely to be proved outside IR35.
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