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- Behave like a contractor in the business world – Make sure that you will not use a staff pass, attend staff dinners or functions as it may takes you into IR35 investigations. Become a responsible contractor by treating each & every work of your client as a top priority and work hard to achieve the goals set by the clients. Make sure you have your own website & business card, printed letter heads & brochures. These things will make your case stronger in case you come under IR35 investigations.
- Do not stop and start work without a Contract change – Make sure you work according to your contract. Do not start or stop work frequently as well as don’t move frequently to different areas unless & until the same is written in your contract.
- No late tax returns – Late tax return submissions or with errors will put you on HMRC’s radar & influence the tax inspector’s to check you more for other mistakes.
- Employ a specialized accountant; don’t go for the cheapest option – Make sure you must employ an accountant who is approachable, specialized in the particular area as well as solve your 95% of the matters on telephone on the same day. An accountant must have more than 5 years of experience in handling IR35. Kindly don’t go for a cheap option of choosing a bookkeeper or an unqualified accountant as it may takes you under IR35 investigations.
- Avoid replacing an employee – Make sure that you always start a contract on the understanding that the role is for contractor not for an employee. If you are filling the contract and taking up the role or responsibility previously belonged to an employee, the client expects you to be his or her worker with the characteristics of an employee. This increases your risk of coming under IR35 investigations.
- Pay for a contract review – There is nothing like IR35 – proof contract. It is essential that you make your contract reviewed by a professional expert and pay the person for reviewing the contract. Professional expert can identify the badly word clauses that may put you under IR35 investigations.
- No name in the contract – You should always work as a business to business service provider (B2B) through your limited company and operates under “Contract for services”. Make sure that when you sign a contract, the name of the consultant should not be mentioned in any schedule or on the contract as it can go against the contractor in the long run. Mentioning of name within a contract may change your business relationship & HMRC inspector can interpret it as employment “contract of service”.
- Keep a contractor diary – You should maintain a contract diary and keep records of your day to day workings such as telephone logs; E-mail copies etc. as HMRC can look back and conducts investigation of your previous contracts. However, if any taxman comes and knocks at your door, you must have a proof of each & everything tax inspector asks.
- Review the contract from insurance company and take the advantage of tax investigation insurance – In order to take advantage of tax investigation insurance, make sure that your contract should be reviewed by the insurance company. It is a wise step to insure you against uncertainties. For example – Accidental fire break out, Washing machine flood or a pipe burst. We can’t predict the uncertainties but we can take steps to protect ourselves.
- Make sure that you are not controlled – There are many tests performed by HMRC to determine whether you are a “disguised employee” and inside IR35. Control is one of the techniques of HMRC in which HMRC checks that whether the employee is controlled by the client or not. You will be caught by IR35 in case you are controlled by the client. Therefore, it is suggested that before agreeing or signing any contract, it is essential for you to confirm with your client that you are in control of what, when, where and how the work will be carried out.
- Secure the right of substitution – Make sure that your contract should contain the “Clause of substitution” for which you must have a team at your disposal to work on the project. Your team can easily work from home or from a remote location but if you can show HMRC that the whole team was involved with you in the particular project at that time, it will benefit you greatly. Make sure that you should have right of substitution in every contract you sign in the future.
- Avoid mutuality of obligation – Mutuality of obligation (MOO) means an employer is obliged to provide work & a worker is obliged to accept. Make sure that your contract allows you freedom to take other projects simultaneously. I suggest that you must have more than one contract running simultaneously. Kindly take on small jobs such as website & E-commerce design or small systems projects as this will add more weight to your case of genuine self-employment. Keep the evidence with you in case you refuse work of your client. It also demonstrates a lack of MOO.
- Avoid getting staff benefits - Make sure you avoid being on organizational charts, keeping business cards & getting any benefits which are normally given to their staff. In short, avoid becoming the part & parcel of the company.
Read More: IR35 Checklist
Read More: IR35 Off Payroll Public Sector Workers
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About the author
Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.
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About the author
Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.
