IR35 refers to the Inland Revenue bulletin that first mentioned about proposed legislation to catch situations in which HMRC believed that the worker had a "hypothetical employment contract" with the client.
The legislation has been with us since 2000, but it is only in the last couple of years that we have seen HMRC putting a much greater emphasis into investigating these cases and in raising enquiries and investigations into this area.
We are specialists in identifying situations which are likely to be caught by IR35 and can advise on the arrangement of contracts so that IR35 risks can be mitigated. In order to be outside IR35 it is important that the contractual relationship between the parties is set out in such a manner that the worker cannot be deemed to be an employee of the end client. It is important that the contract sets out the terms of the contract clearly, but it is of equal importance that the actual contracting relationship of the parties falls outside of IR35.
HMRC have their own interpretation of the types of arrangement that will fall outside of IR35, but it is important to remember that it is the courts that will ultimately decide whether a situation is within or outside IR35.
There are many important decided cases which will influence whether a particular situation is within or outside IR35. We have experience in dealing in this area, and can advise on particular situations, and provide you with an IR35 contract review.
The key areas to look out for in a contract review would include:
- whether there is a valid and enforceable substitution or sub-contracting clause in the contract
- whether there is "control" over the worker in the contract
- if there is mutuality of obligation between the parties
- the level of financial risk that the worker is bearing through the contract
The above are a few of the key areas, but it is important to review the contract as a whole and to ensure that the whole contract falls outside of IR35.