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Will the three year rule still apply?

Question

A large company that I am interested in contracting for has a union rule that contractors are only allowed to be engaged on contracts for three years maximum and then cannot be engaged on another contract for a minimum of six months, at which point a contractor can be engaged for another three years.

Firstly, is this a positive aspect with IR35 since the rule is not applicable to permanent staff? And secondly, if the company decides that their contracts are within IR35, will they still be able to apply the three year rule?

Answer

The fact that there is a union rule regarding the length of engagement that a contractor can have will not mean that the contract is outside of IR35 as personal service, SDC and MOO are still the main areas to be considered in respect of IR35.  However this rule would need to be taken into account when considering your employment status as would other factors such as your financial risk and whether or not you are in business on your own account etc. The three year rule is unlikely to have any material effect on the outcome of an IR35 review by HMRC as it will be seen as a minor pointer towards self-employment but by no means conclusive.

As for them applying the rule if the contract is deemed to be inside of IR35, I am afraid that you would need to speak to the union concerned in order to ascertain how they view this situation.

This answer was provided by Qdos Contractor.

By Contractor Doctor

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