Author: Gina Christodoulou
Contractors in the UK who use limited companies are not always aware of the IR35 risk they face when choosing to contract to one end client. We have written a number of articles about IR35 risk.
In this article we outline some tips to reduce your IR35 risk and we look at some common IR35 questions. This is not a complete list and should be read in conjunction with detailed IR35 advice. Please note where we refer to limited company or contractor it means the same thing.
Getting your contract right
- It is common for limited company contractors to find work through an agent and then to enter into a contract with that agent. The agent in turn enters into an agreement with the end client. It is also important for the limited company to enter into its own contract with the end client and preferably this should be initiated by the limited company and not the end client.
- Contracts should not provide people. They should provide services.
- It is very beneficial to have a fixed fee in your contract for services that are output based as opposed to a rate per hour or day. This doesn’t stop you from performing various projects for an end client – each fixed fee separately negotiated. In general, employees get paid whether they are given work to do or not, true independent contractors are only paid for the work they actually do (you wouldn’t pay your builder if they pitched up to work on your extension but sat in your garden all day).
- Check your contracts carefully because some onerous contracts are saying that if HMRC finds your contract to be inside IR35 then it will be up to the contractor to pay all the tax back!
Would you like your contract reviewed for IR35 purposes?
At SAIL, we offer our clients one free IR35 contract review a year, but we urge you to watch out, IR35 is not only about your contract!
Is my contract covered if I have IR35 insurance?
You cannot buy insurance to protect someone else’s risk. You only need IR35 insurance for work you are doing where you are the one that HMRC might open an inquiry against.
What if my client requires me to work from a specific location? Would that put my contract at risk of IR35?
If the location in which you must do the work is defined by where the work is carried out, then it should be fine to have this as a set location in the contract as it is considered neutral. If the location however creates the impression you are under the control of the end client this increases your risk.
What if I am offered a mixture of inside and outside of IR35 contracts from various clients, can I run these contracts through the same limited company?
Each engagement is considered on its own merits so there is no concern having a mixture of inside and outside IR35 roles for different clients through the same limited company.
Contact one of our SAIL advisers today to discuss your IR35 status and have your contract reviewed.