Contractors and IR35: Showing You’re Not a Disguised Employee
Since the government’s plans to shake up IR35 in the 2017 Autumn Statement, the industry has been rife with speculation about the future of contractors working in the private sector.
Recent changes to HMRC’s testing status meant that contractors may have even less control still. The government has recently announced that it intends to discredit MOO (Mutuality of Obligation) as one of the determining factors of a contractor’s IR35 status. Mutuality of Obligation outlines the obligation of the employer to provide work and of the employee to accept said work.
In light of this news, it’s important for contractors to understand that they do not have to forgo all of their freedoms. Though there are no hard and fast rules and the decision does ultimately rest with HMRC, there are things you can do which may benefit you.
Show that you’re different
The easiest way to distinguish that you’re different than your client’s other employees is to show it. Think about what freedoms you can exercise as a contractor and put these into practice. Some easy examples could be for you to regularly change up your work schedule, work from home when you can and to negotiate your salary if possible.
Provide your own equipment
Contractors who buy and use their own tools for work could use this as a way to distinguish themselves from a company’s permanent employees. One of the tests that the government will generally conduct when reviewing your contract is ‘provision of equipment’ so committing to provide your own tools for the job may stand you in good stead.
Think about your contract length
If you’ve signed up for a long-term contract or one with an ambiguous end date, this could make you look like a permanent employee. As a rule of thumb, project-based contracts are better than fixed fee assignments and can help to make you look more distinguishable in the eyes of HMRC.
Invest in your company
A company which is making regular investments and taking steps to expand is one which will be easily distinguishable from a limited company. If appropriate, take opportunities to expand where you can including hiring employees and investing in equipment. For instance, a virtual office or premises for your business could work well.
Find out more
For more information about IR35 and how your status is tested, watch our video.