With a New Year always comes change, whether it is a change in diet or a new contract. We already know that changes to IR35 will occur in the not-too-distant-future, as highlighted in the notes of the Autumn Budget 2017. A consultation document on IR35 reform in the private sector is expected to be published early this year at the very least, and we expect actual reform to take place in 2019 based on HMRC’s timetable for consultation processes.
To prepare for such change, one of the first things any contractor should do prior to accepting a new engagement is to have the contract reviewed. It’s still surprising, given that the IR35 legislation has been around for almost 18 years, how many times we receive what looks more like a contract of employment than a contract for services.
HMRC will usually begin an IR35 enquiry by requesting and considering the contractual terms, and if there is any ambiguity over the contract, it will simply lead HMRC to ask more questions to clarify any uncertainty over the nature of the engagement. The contractual terms should therefore be the first port of call for any contractor wanting to ensure IR35 compliance.
Whether a novice or veteran contractor, it’s crucial to ensure that the contract is reflective of the services being undertaken and how the work is going to be carried out. In an IR35 enquiry, it is much easier to defend cases where the contractual terms mirror the working practices.
A contract review will highlight any areas of ambiguity particularly over the most important status issues, such as Right of Substitution/Personal Service, Control, and Mutuality of Obligations. However, it will also address other areas of concern such as employment-related terminology or contradicting terms.
If there is anything you are unsure about, don’t be afraid to ask your agency or the end client. The agency/end client may be aware of impending changes to IR35 in the private sector and may be more sympathetic than they might have been when IR35 was first introduced. If neither party are aware of the changes, advising them of what is likely to happen in the future could give them the impetus to make changes to your contract in order to address any IR35-related concerns.
As with the public sector where IR35 reform has already been implemented, clients and agencies will be keen to ensure that they don’t lose invaluable specialist skills and services provided by contractors and the flexibility of such services. There has never therefore been a better time to negotiate changes and talk to your agency or end client about IR35.
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