Contract Outside IR35 – Ten Clauses that Should do it

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Contract Outside IR35
Contract Outside IR35

Contract Outside IR35

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We have put this together from various pointers from the Special Commissioners. They should take your contract outside IR35. You should, therefore, follow as many of these as you can.

1. Firstly, it is crucial that when the contract is for a fixed period of time, which they usually are, then it should be stated that this is just an estimate for the work to be done.

2. The work to be done should be stated explicitly in the contract. So, if you can, make it as unique as possible to your own skill set.

Outside IR35
Outside IR35 tax

3. Make it clear, in the contract, that you will be doing only the tasks stated in the contract.

4. State in the contract that the hours worked per week may vary based on the work needed to complete the project.

5. Make the payment terms and invoicing terms explicit in the contract. Also, make it that your company must receive its money X days after receipt of invoice. If you can, put a penalty clause in.

Substitution Clause

6. The substitution clause appears to be of the utmost importance. Make sure that you have the right of substitution, i.e. the right to replace yourself with someone else, written into the contract. The Special Commissioner said that Case Law showed that where there is a right of substitution then you MUST be considered to be a small business rather than an employee. The Commissioner also said that the courts must take the substitution clause in your contract at face value without evidence to the contrary.

7. Give your client company the right of refusal for any substitute that you offer.

8. Make sure that you register for VAT and that your contract states that you will add it. This will distinguish you from an employee, as they NEVER charge VAT on top of their salaries.

Expenses for Travel

IR35 Factors
IR35 Factors major and minor

9. Have it stated on your contract, that you will be responsible for all expenses for travel between your client’s different sites. This is a bit of a downer, but let’s hope that it is just bus fares or tube tickets, rather than flights to Sydney. I’m sure that you can do most of what you need to do over the phone or the internet anyway.

10. If it is a job where you can use your own laptop rather than the company’s, at least part of the time, have it stated in your contract that you will be responsible for supplying your own PC.

Strong Indication of Contract Outside IR35

While it can never be said for definite how HMRC will view these changes, there have been strong indications by the Special Commissioner that these clauses in the contract will be points in favour of you being viewed as a small business rather than a disguised employee.

So, they should take your contract outside IR35.

See an explanation of all the major and minor IR35 Factors by clicking on IR35 Factors

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