What is IR35?
HMRC is changing the rules affecting how businesses (i.e. your clients) engage
with contractors like you.
Onus (and risk) is shifting to the client rather than the contractor – if they get it
wrong, they (rather than you) are liable for tax and NI that would/should have been paid.
It will now be your clients’ choice
HMRC will now come to the employer
UK only/UK employers only
HMRC will be testing to see whether you fall inside of the payroll, or outside of it
There are tools you can use
But, the people setting the policy are not relying on the source, so some of these tools can be complicated
Here are some questions you might want to test yourself with:
Is the job you’re doing for your client, could you do it on a temporary contract?
Is there a mutuality obligation? Who’s direction are you working under?
Right to substitution, is the contract personal to you?
Do you have a degree of control over how you work?
Is the client providing you with any equipment? If yes, this may suggest an employment relationship
Do you take financial risk?
Are you in business on your own account? Does the way you operate suggest you’re running a business?
How are you paid?
Do you work with other clients?
Are you entitled to benefits that may come across as Employee-type benefits
There are no firm rules
How the employer decides
You have the right to object
Look at factors and how you work in practice to put together a case
There is no template contract
It changes every time
But, look for it to mirror the obligations that you’re giving to your client
But HMRC will be looking for personal service companies
A limited company that’s made up of just you
Going forward you might need to find clients that will want to work with you, such as smaller clients
Bigger firms may have more procurement
Also, might have a lot more hoops to jump through
You might also want to think about how you frame yourself, how do you engage with clients?
Some of the Key QuestionsAnswers from Andy and Kim Will you have to pay NI and tax?Yes, if you’re under there payroll What’s the actual difference between being an employee and going within the IR35?
Contract of employment
Would be very different to your contract as an independent contractor
Some contracts prevent you from working for multiple organisations, will this stop me from spreading my time across different clients? It will depend firm by firm and you will have to check over the contractCan I get IR35 insurance?The risk is now with the employer, so it will fall on them. But yes, you can get insurance. What about if I get an office?No, this wouldn’t count/wouldn’t be enoughIf it’s a small entity, will you be liable?You won't be liable because you won’t be subjected to it, as you’re outside the catchment
Key outputs from the workshop
Tools: Use of various available assessment tools (such as CEST and Contractorcalculator.co.uk)
Right of Substitution - Associate model: Sharing experiences and potentially wording. A pooling approach to help with the right of substitution and ability to substitute another Camelot member. Camelot helping each other in terms of substitution - what could this look like (annual pre-vetting, pre-validation/endorsement/accreditation, 'yes this person does work as an independent consultant' ? - Build on Mark Simpson's successful "Associates" model (mirroring the contract you have in place with the client with the contract you put in place with the associate, plus any necessary due diligence checks) Pre-vetting done by Camelot? DBS checks, employment checks etc. Then every year we would have people that are accredited and ready to go.
Camelot Hit Squad: How to easily form a Camelot HIT squad to pitch and then deliver a specific project for a client
LinkedIn: Camelot members including membership of Camelot on their LinkedIn profiles (to help provide evidence)
Contract templates: A template contract (or set of contracts) available for members
Insurance: Availability of suitable insurance against IR35 (e.g. Kingsbridge Insurance) - Bulk discount for Camelot members ?
IR35 intel page: for the collation and sharing best practices - setting up a discourse group to give the space for discussion and sharing of documents/best practice for latest changes/trends and hints and tips (Discourse or the Camelot Resource Bank ?
Procurement Process: Join forces in helping each other go through a client's arduous procurement process (hints and tips guides, templates etc..) - Could Camelot even be put on their PSL list ?
Camleot taking a leadership role: Friendly corporate organisations that would validate the camelot members as to how they are using their contracts and also share awareness and help in educating clients/prospects, could/should Camelot take on the role of lobbyist/campaigner ?
Useful links and suggestions:
Some thoughts from our Camelot Members:
A brief explanation of the key factors of IR35/off-payroll:
There are some key things that a company needs to do primarily around the ‘part and parcel’ aspect of IR35. This element looks at whether someone is treated by the company in the same way as employees are treated, for example:
Having a staff pass that looks the same as that of an employee (they should have a 'contractor’ / visitor pass)
Being invited to staff events (summer & xmas parties) ie don't go!
Being allocated a job title that is also used on org charts e.g. programme manager (rather than being identified as a consultant)
Having line-management responsibilities is a no-no ie appraisals etc (managing a programme and programme resources is different)
However, ‘part and parcel’ is a lesser aspect of IR35, the key determinants from an HMRC perspective being Control, Substitution and Mutuality of Obligation (these are known as the principal ‘tests of employment’):
Control: what degree of control does the client have over what, how, when and where the worker completes the work?
Substitution: is the personal service by the worker required, or can the worker send a substitute in their place?
Mutuality of obligation: mutuality of obligation is a concept where the employer is obliged to offer work, and the worker is obligated to accept it. Employees have this, consultants (or anyone on a contract basis) usually doesn't. Court cases have focused heavily on this aspect.
Also, if it's a BAU role it will be inside IR35. Project based work, where there are outcomes and objectives to deliver, has a better chance of being outside IR35.
It's important to be able to show that you operate as a consultant i.e. marketing yourself, multiple (or trying to get) clients, insurances, websites etc.
Fyi, an IR35 assessment using a proper tool (not CEST).
contractcalculator.co.uk gives a thorough explanation of each area... it's algorithm is based on results from actual court cases etc. This one is based on an agency contract for my RSA contract.
Contracts (find in folder) that I had drafted in 2019 that are 'IR35 compliant'. There are two flavours:
between an end-client and the company providing services i.e. the independent consultant's limited company (RFH in my case) [...providing services to client]
between e.g. RFH and associates ie people that I would engage to work on assignments that needed additional resource etc. [...providing services TO consultancy]
I had these drawn up by a solicitor who works in the IR35 space so they should be appropriate, however, they do need to be updated to reflect changes since 2019 e.g. working time directive as now doesn't apply (there may be other minor tweaks).