How important is MoO in an IR35 assessment?

Q. My contract states there is no Mutuality of Obligation (MoO) at the end of my contract period, but even so it has been determined inside IR35 partly because MoO does exist on a day-to-day basis. I assume that MoO does exist to a degree, given I’m asked to complete work on a daily basis and I complete that work, but should this mean I belong inside IR35? Also, should MoO apply to the day-to-day working engagement or at the end of the contract?

A. As is often the case when it comes to the IR35 legislation, unfortunately there isn’t a simple answer regarding the existence and weight of MoO. 

The presence of MoO is a pointer towards an inside IR35 engagement, but your status should not have been set based only on this aspect of the legislation. And simply providing a service to your client doesn’t demonstrate that an obligation to accept paid work exists in the way that it does in an employer and employee relationship. If this was the case, MoO would exist in all contracts – this is something that HMRC believes is true, which is why this crucial aspect of the IR35 legislation is missing from HMRC’s IR35 tool, CEST. 

However, HMRC has been proven wrong on a number of occasions, with it being decided that MoO was not ultimately present in Paul Hawksbee’s recent IR35 win, along with Jensal Software Ltd’s victory in 2017. 

While MoO is still considered one of the three key status tests – alongside Control and Personal Service – it’s not necessarily decisive in all IR35 cases. In other words, even if it does apply to a contract that’s not to say it belongs inside IR35. Take Lorraine Kelly’s £1.2m IR35 Tribunal Win, for example – it was decided that MoO existed but even so, Ms Kelly was found to be outside IR35. 

In an IR35 investigation, it’s likely that HMRC would look at the day-to-day working practices and the written contract. So, for example, does MoO exist during the contractual term day-in-day-out? And is it present at the end of the contract or are there clear start and end dates to the contract with no obligation for the engagement to continue past this?

As a genuine contractor, it’s important that you have the right to say ‘no’, turn down work and even walk away from the contract if you want to. To increase your chances of being assessed outside IR35, you should also avoid rolling contracts.

This answer was provided by IR35 specialist, Qdos Contractor.