IR35 - Step 1 in surviving IR35

The Intermediaries Legislation, more usually known as IR35, was first adopted towards the start of 2000. When it was introduced, it was supposed to stop workers from avoiding paying tax, and enforce the mandatory National Insurance Contribution (NIC). It would do this by forcing certain companies to pay the same tax as their employees.

This has been an unpopular piece of legislation, especially since most UK freelancers are genuinely self employed consultants who are taking entrepreneurial risk in providing their services. A well worded contract can help them underline their self employed status. Likewise, a poorly worded contract can undermine that status at a stroke.

The easiest way to solve this problem, is just to have your contract checked over by an expert. A qualified IR35 reviewer will look over it for about 120. This is really a very small amount, considering the thousands of pounds that you stand to lose if you get it wrong. It's plain, good economic sense to get your contract reviewed.

So let's go over some of the key factors that you need to consider. Here are a few questions that may help you determine if your contract is likely to pass.

1. Will your company be financially responsible for failure? [Yes = Good]

2. Will your sound management be profitable for your company, in performing the contract? [Yes = Good]

3. Is your contract specific to you, or does your company have the right to send alternative personnel? [Yes = Good]

4. Will the risk of bad debts be born by your company? [Yes = Good]

5. Is your contract a "Contract for services" rather then a "Service contract"? [Yes = Good]

6. Are you entitled to sick or holiday pay? [No = Good]

7. Are you an d your client related as if you were "master and servant"? [no = Good]

8. Do you and your client have mutuality of obligations? [No = Good]

For a UK freelancer, if all of the above seems to be in order, then you have a good chance of being unaffected by an IR35 investigation. However, you need to consider not only what is written in your contract, but also how it is written. Even if all of the contents of your contract are in order, a badly phrased paragraph could still easily sink you.

Thus, the first thing that you need to do is to have your contract reviewed by a professional IR35 contract reviewer. An expert should be able to give you some good advice about any parts of the contract that need to be changed. If you do need to change something, then make sure you get it changed before you sign!

Article Source: http://www.yourarticle.info

This article has been provided by Home Loans Direct and Small Business & IR35 Contractor Accountants Antony J. Holdsworth & Co.

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