IR35 - Cut Through the Confusion
Small companies are exempt from the legislation; you must apply the legislation if you meet two of the following:
- Turnover of more than £10.2 million
- Balance sheet of more than £5.1 million
- More than 50 employees
You will need to provide the reasons as to how and why you have determined the employment to be inside or outside of IR35.
You will need to consider the following key indicators for IR35 (we can provide further detail on the below on request):
Control & Direction
Are you under direct control of your client?
Is the contractor required to carry out the work themselves? Can they send a replacement? In a contract outside of IR35 the business must be able to provide a replacement if the original worker is unavailable.
Mutuality of Obligation
Is there an obligation on the worker to work and an obligation on the other party to pay and to continue to make work available during the time of the contract?
Is there evidence of the contractor taking financial risk to deliver the project?
Does the individual work for just one client, and have their contracts been renewed many times? The self-employed typically work for a number of clients at once.
Part & Parcel
To what extent has the individual become part of the organisation? i.e. do they have access to staff facilities, attend staff meetings, attend staff social events or receive staff benefits?
In Business on Own Account
There are number of typical pointers to behaving and acting like a ‘real business’ for IR35 purposes i.e. multiple clients, own website, company email, own their own equipment, registered for VAT, advertising its services, registered with the ICO – to name but a few.
Provision of Equipment
Does the individual use equipment provided by the client, or do they use their own?
The wider impact on the economy remains to be seen and some companies are cutting all contract staff in what appears to be a risk-averse approach. It’s clear that this isn’t going to be a smooth process and we could see a situation in the next couple of months where hundreds of thousands of contractors wait ‘on the bench’ whilst firms refuse to hire contractors, projects are delayed and the economy suffers.
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