Attwells possess the necessary expertise and experience to advise contractors on their IR35 status, draft the necessary protective contractual documentation and provide practical guidance on how to amend working practices in an effort to fall outside of IR35.
What is IR35?
IR35 was first introduced by HMRC in 1999 to combat tax avoidance by workers supplying their services via a limited company (‘Personal Service Company/PSC’), who, but for the PSC, would be considered an employee (and pay increased levels of income tax and NIC’s as a result). Effectively, such workers were ‘disguised employees’ and benefitted from a net saving in tax of up to 25% when compared to a directly employed individual. The engaging organisation also benefits from significant savings as they do not have to pay employer NIC’s, nor do they have to offer any employment rights or benefits.
What factors determine IR35 status?
IR35 is determined by reference to the contract in place and the working conditions. You cannot avoid IR35, nor can you or your end client determine your IR35 status. HMRC use a number of factors when deciding if a contractor falls within IR35, including:-
- Control – does the end client tell you how, when and where your services must be performed?
- Personal service – do you have to personally provide the services or can you send a substitute in your place?
- Financial Risk – if your work is unsatisfactory, are you obliged to correct it in your own time for no additional reward? Is there an opportunity to make a profit/loss?
- Length of Engagement – Have you worked for the same client on a long term basis? Have you worked for other clients?
What if HMRC decides IR35 applies?
If a contractor is deemed to be inside IR35 and labelled by HMRC as a disguised employee, the contractor will have to pay income tax and NIC’s as if their contracting fee income were employment income and the personal service company will face a financial penalty. Therefore the potential liabilities for a PSC are huge and it is very important that they have a clear understanding of IR35 so as to ensure that they do not fall foul of it. However, this is by no means an easy task given that ever since its introduction, IR35 has been criticised as being highly complex and confusing.
How can Attwells assist?
IR35 is extremely complex and therefore it is crucial to get expert, professional advice from someone experienced in dealing with IR35. We can offer that advice and offer the following services:-
- Consultation and letter of advice– we can meet with you, take your instructions and review your current working conditions and then provide you with a letter of advice setting out what steps to take going forward to best protect you from IR35.
- Reviewing existing contracts and assessing IR35 status – Unlike our competitors, we do not just tell you the result of our review (i.e. whether you are inside/outside IR35), but also give the reasons for this determination, risk areas and what steps can be taken to strengthen your position in arguing that you do not in fact fall ‘inside’ IR35.
- Drafting new IR35 contracts – We will draft fresh contractors for your PSC including all the relevant safeguards needed to protect you from falling foul of IR35. We will also provide advice around what mechanisms you can out in place, within the current day to day working practices, to further reduce the risk of IR35 applying.
Why should I use Attwells?
Lloyd Clarke, Partner, is an IR35 specialist. He has advised many contractors on their IR35 status over the years and has successfully put in place contracts and other safeguards for them so as to ensure they do not fall foul of IR35. Lloyd has acted in high profile matters relating to IR35, including representing a national TV presenter in challenging HMRC’s IR35 determination and works alongside Accountants and Tax Advisers in delivering cost effective IR35 advice to their clients. Attwells provide competitive fixed fees for IR35 advice, allowing you to know in advance what the full costs will be.