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IR35 - Step 1 in surviving IR35

The Intermediaries Legislation, more usually known as IR35, was first adopted towards the start of 2000. When it was introduced, it was supposed to stop workers from avoiding paying tax, and enforce the mandatory National Insurance Contribution (NIC). It would do this by forcing certain companies to pay the same tax as their employees.

This law has become rather disliked, particularly by freelancers, who typically take significant risks in their business. If they have a well written conmtract, then it supports them, and highlights their self employed position. However, if it is poorly written, thenit can undermine them and even fall foul of the dreaded IR35.

The easiest way to solve this problem, is just to have your contract checked over by an expert. A qualified IR35 reviewer will look over it for about 120. This is really a very small amount, considering the thousands of pounds that you stand to lose if you get it wrong. It's plain, good economic sense to get your contract reviewed.

Before you send it off for review, I'd suggest you check some things yourself, just to see if there's anything that you obviously need to change.

1. Will your company be financially responsible for failure? [Yes = Good]

2. Will your sound management be profitable for your company, in performing the contract? [Yes = Good]

3. Is your company permitted to send alternative personnel? [Yes = Good]

4. Will the risk of bad debts be born by your company? [Yes = Good]

5. Is your contract a "Contract for services" rather then a "Service contract"? [Yes = Good]

6. Are you entitled to sick or holiday pay? [No = Good]

7. Are you an d your client related as if you were "master and servant"? [no = Good]

8. Do you have mutuality of obligations with your client? [No = Good]

If you are a freelancer, working from the UK, and everythign listed above checks out for you, then you are likely to be fine in the event of an investigation. However, be careful. It's not just what your contract says that matters, but also how it is written. IR35 investigators look very closely at the precise wording of contracts, so you need to be sure you use exactly the right phrase.

So, the first step in making sure you are completely in the clear with regards to IR35 is to contact an expert reviewer. Get them to take a look at your contract, and sound out anything that might trip you up. Just be sure you get thsi done before you put pen to paper and actually sign it.

Article Source: Free Content Articles Directory

This article has been provided by Home Loans Direct, and the Small Business & IR35 Contractor Accountants Antony J. Holdsworth & Co.

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