IR35, IR35 rules, Employment Status and IR35 Defence

IR35 Tax Rules

With regard to HMRC, the position of whether an individual is employed or self-employed is not always as cut and dry as it may seem. Many individuals wrongly assume that they themselves are free to choose their status. However as far as HMRC is concerned, a person must meet a strict set of criteria to qualify as self-employed for tax purposes and these are not always clear cut.

In deciding, the following are the most important requirements:

• The percentage of your business that one particular client is responsible for.
• If anyone other than you controls what, where or if you take on business.
• The general terms on engagement.
• Your right to use substitute labour to do the job.
• Who bears the financial risk.
• Who owns and provide any equipment required.
• Your ability to profit.
• What the terms of payment are.
• Opportunity to profit from sound management.
• If there are any employee benefits.
• Whether or not there is a right of dismissal.
• The intention of both parties; and
• The length of contract.

Generally these mostly concern issues of employment law, and are not specific to any tax legislation. The rights of an individual are often determined by Case Law and it is often possible to challenge HMRC decisions. If you feel you have a grievance ATC Solutions can take your case up with Tax Commissioners to get a HMRC decision overturned.

If you get it wrong then the implications and the costs can be quite substantial. It is not only the issue of of employees and employers national insurance, if you are designated as an employee there are various other employment rights like holiday pay, maternity pay as well as the possibility of unfair dismissal. The decision about whether somebody is employed or self employed has to be made by you the employer and the liability is yours. If you make a mistake it will be practically impossible to recover penalties, tax, interest, from the individual.

ATC Solutions can audit your current arrangements and provide a professional opinion on whether they are likely to be acceptable to HMRC. We can also help you draft contracts for work or services.

IR35 Defence Strategies

Often the arguments concerning employment and self-employment are similar. For many businesspeople and contractors the IR35 can be a very complex area. The key to it all, though, is making sure your contract is right. If you have that, then IR35 does not apply, it's that simple. ATC Solutions can help you. We can provide draft contracts, reviews of your current situation, and we can present your case to the HMRC and appeal to the Tax Commissioners where necessary.