Any contractor working via a PSC should be taking the due diligence to ascertain their status before and during a contract. An IR35 test could be a contract review or an online questionnaire, such as the new HMRC ESS tool created for the off-payroll rules in the public sector.

IR35 Test: Contract Reviews

A contract review provides you with a professional opinion on your status, by an IR35 expert. This should include both the written contract and actual working practices (the real working relationship with your end client), which may mean that you will need to check part before the contract start, and part once it has started to get an accurate reflection of your status. After undertaking an IR35 test of your status, you can then determine whether IR35 applies or not, and pay your taxes appropriately.

IR35 Test: Online Questionnaire

Online IR35 tests can be less relied upon, mainly because they don’t take into account context, industry, and often don’t explain what a question is actually asking you. For example, many of these online tests will ask you if you report to a line manager, to determine SDC to some degree (supervision, direction, and control). Many contractors may answer yes to this, thinking that they sometimes give progress reports to their end client or may have to deal with client management as part of the role, and so will say yes – but this may not be a true reflection in relation to what the question is actually asking which is, are you managed by your end client like an employee.

For the off-payroll rules introduced for the public sector in April 2017, HMRC developed an online IR35 test – the ESS tool. Most contractors do not believe that this tool is trustworthy and they can be forgiven for being sceptical. The tool has been criticised for changing even after the rules were implemented – potentially changing the outcome of the test for contractors that have already relied upon it, missing key status tests like Mutuality of Obligations, and often providing indeterminate results which fail to offer any real assistance.

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