Accessibility Links

IR35 – Information for Candidates

What is IR35?

Originally introduced in 2000, IR35 is an HMRC initiative to uncover what they consider to be disguised employment within the UK contractor workforce. This legislation impacts contractors who are working through their own intermediary, often a limited or professional services company, also known as off-payroll workers.

The new legislation means that the way these workers are processed will change and that now (if the rules apply) then the correct action must be taken by the fee-payer (the agency). 

HMRC have released draft legislation, with the final legislation expected with the budget in March 2020. The legislation will come into effect in April 2020.

Unlike the public sector, the private sector rules will not apply to small businesses.

If your assignment is for a client who is deemed to be a “small business” (this determination will be given by the client to Profiles Creative) then there is no change to your current way of working and you will continue to be responsible for determining your own IR35 status.

The definition of a small business is if a Company meets at least 2 of the following criteria:
  • An annual turnover of less than £10.2 million
  • A balance sheet showing assets of less than £5.1 million
  • Fewer than 50 employees

If a business does not meet the criteria for being defined as a small business than it will be considered as Medium or Large.

At present, contractors working through their own intermediary in the private sector are responsible for determining their own IR35 status.  After April, where a contractor is working for a Medium or Large organisation (based on the guide above) it will be the end hirer not the contractor who makes the decision on the IR35 status of the assignment.


How is IR35 Determined?

Until the final legislation is released, there is some uncertainty around exactly how HMRC will determine if a contract falls within IR35. However, while there may be minor tweaks, we are not expecting that there will be any dramatic changes from the draft to final legislation.

While there are many ‘tools’ in the market offering support to contractors with status determinations, at present, HMRC is only recognising their purpose built CEST tool.

https://www.gov.uk/guidance/check-employment-status-for-tax


The three main factors are:

Right to Substitution
Supervision, Direction and Control
Mutuality of Obligation

What does this mean?

Right to Substitution - are you able to/have you ever offered your client a substitute if you can’t complete the assignment? Does the client have the right to refuse your suggested substitute?
Supervision, Direction and Control – one of the most important factors. How much supervision power does the client have? Do they determine your hours, place of work, lunch break? Do you need consent for time off? Do you work on a project or to fulfil a role?
Mutuality of Obligation – do you work with one, or more clients at any one time? Do your clients have a say in which other clients you work with? Do you work set hours or on an ongoing basis?

The other determining factors are:

Financial Risk – if you make a mistake, do you have to rectify it for free?
Length of Engagement – the longer the engagement, the more likely it is to fall inside IR35
Right of Dismissal – do you have a notice period in your contract? If so, this could contribute to an inside IR35 status determination
Basis of Payment – daily, weekly, monthly, project or milestone based?
Part and Parcel of the Organisation – do you act like an employee? Hours, holiday, staff canteen, gym, social/sports clubs
Provision of Equipment – your own, or the companies?
Employee Benefits – holiday and sick pay, Christmas parties, sports facilities
Whether you benefit from Sound Management – contract for service, or contract of service
The intention of the parties – did the client want a contract for services or a contract for employment?


Factors in Determining IR35 Status
Example Determination Factors

 

 

 

 

This information is designed to help you better understand the upcoming changes to the IR35 legislation.  We will do everything we can to help make this transition as smooth and as clear as we can for you but our advice should in no way be considered a substitution for formal legal or tax advice.  You should always consult with your Accountant and / or legal advisor on any questions relating to your personal circumstances. 

Our Top 10 Favourite Industry Blogs
16 Sep 2019
Our Top 10 Favourite Industry Blogs
Sometimes it’s so easy to get caught up in the everyday tasks and challenges of your marketing...