Moving inside IR35: do contractors have anything to worry about?

Is having a contract in place a legal requirement?

Do freelancers need a contract in place before starting?

Q. I’ve been freelancing for a year or so. I work with a number of clients, occasionally simultaneously, but more often than not, one by one. Whilst I understand that having a contract in place is considered beneficial, is it absolutely necessary? I have everything agreed in writing via emails with my clients, but should I insist they sign one before the work begins? This isn’t my area of expertise, so any advice would be appreciated. 

A. Whilst having a contract in place beforehand and during the engagement isn’t a legal requirement, it will protect you and your client’s best interests and minimise risk – whether that’s from an IR35 perspective or in the event of a breach of contract. 

When signed by all parties (including the recruitment agency if involved), it can be vital in preventing disagreements further down the road. It shows that all parties are in agreement and satisfied with the terms and conditions of the engagement. Therefore, it’s highly recommended and important that one is in place before you start work. 

Compared to a verbal agreement or an email exchange confirming certain aspects of the engagement, a professional contract is legally binding and enforceable. As a contractor, you work without employment rights as it is, so any form of protection you have may prove crucial. You leave yourself exposed without one in place. 

A contract should also demonstrate IR35 status and it will be HMRC’s first port of call in the event of an IR35 enquiry. While you might clearly belong outside the scope of IR35, it’s unlikely that an informal email, for example, is able to detail the specific reasons factoring into this decision. Your contract should be able to. If you’re unsure of your IR35 status, an IR35 contract review will offer an expert and independent view. 

Along with other aspects, it should also include information regarding fees, project length, working practices and payment terms. The moment it’s agreed and signed, you gain some certainty. In other words, it becomes difficult for either party to break the terms.

Aside from protecting your IR35 status and financial interests, it’s worth bearing in mind that many businesses will not work with contractors without a contract in place. Meanwhile, recruitment agencies are likely to insist on this. For more information and to receive a free outside IR35 contract template, please click here.

This answer was provided by IR35 specialist, Qdos Contractor. Ask your contracting-related questions to the Contractor Doctor here.

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