Frequently Asked IR35 Questions

The IR35 legislation is a major headache that affects many contractors, and is considered to be the biggest ‘hot potato’ within the contracting industry. With so much information (and sometimes misinformation) available on the internet, it’s no wonder that people end up confused.

As a result of this, we have spoken to IR35 experts Qdos Contractor to shed some light on three of the most frequently asked IR35 questions.

Ensuring Compliance

Question:
"I am a contractor, and I fear that I may be working within IR35. The company that I work for is quite dismissive of IR35 when I approach the subject, and encourages me to act like ‘one of the team’. What lengths can I go to in order to ensure that I am IR35 compliant?"

Answer:
It’s always going to be very difficult if your client effectively sees you as an employee. This is one of the main points of IR35; if you are treated like an employee you should be taxed as one. HMRC will be quick to speak to your client and their evidence will take precedent over any positive clauses in your written contract.

Perhaps the first step would be to speak to your client. They have engaged you as an independent resource and are benefiting from the fact that they don’t have the obligations of an employer. They can’t have their cake and eat it: if they are taking contractors on they should be treating them as such.

It is in your client’s interest for you to be outside IR35. If you were found to be caught by the legislation, there would be nothing to stop you from taking the client to an employment tribunal to claim retrospective employment rights – holiday pay, sick pay etc.

Having a compliant written contract is obviously a basic requirement from an IR35 perspective, but this will be irrelevant if the above is not addressed first.

24 Month Rule & Length of Contract

Question:
“How will the 24 month rule affect me in terms of IR35? Also, my contract has been extended which will mean I’ve been with the same client for more than 2 years, how will this affect my IR35 status?”

Answer:
There is no connection between the 24 month rule regarding travelling expenses to and from a site and the IR35 legislation. There is a common misconception amongst contractors that working for a client for two years will mean they are automatically caught by IR35. This is incorrect; there is no specific time limit on how long you can provide services for one client.
 
Of course, the longer you are at one place, the more likely it is that HMRC will argue that you are ‘part and parcel’ of the organisation. However, if your contract and working practices remain IR35 compliant, the length of time you are there is largely irrelevant. Indeed, we have successfully defended contractors who have been at the same place for upwards of five years.
 
The only other point to make is that the longer a contract is, the higher the potential liability will be if you are ‘caught’ by IR35.

IR35 Investigations

Question:
"I am a contractor and I believe I work compliantly, do IR35 investigations not apply to me? And am I ‘safe’ from HMRC?"

Answer:
HMRC can mount an enquiry into any contractor, regardless of how compliant you believe you are. If you are trading as ‘outside’ IR35 and taking dividends, there’s nothing you can do to prevent an IR35 enquiry. Obviously if you are genuinely in a strong position and have taken steps to ensure you are compliant you will stand a good chance of winning your case, but IR35 investigations are rarely simple affairs.

HMRC will not only question you and look at your written contract, but will also seek evidence from your end client. They will be interested in the reality of the relationship, so you need to be confident that your client views and treats you like an independent contractor.

IR35 Enquiries

To pose any questions regarding IR35 and its legislative laws, please leave your queries in the comment box below and we shall ensure that they are answered directly.