Do start and end dates mean I belong outside IR35?

Q. I typically work on contracts outside IR35 that last anywhere between three and six months. With medium and large private sector companies set to become responsible for administering the IR35 rules from 6th April, I’m concerned that my client will blanket place all of its contractors inside IR35 due to the changes. With this in mind, how important – if at all – will having a fixed start and end date in place be when securing an outside IR35 contract?

A. While agreeing on a specific start and end date for your contract will start to paint a picture of an outside IR35 engagement, it’s highly unlikely that it will be enough on its own to guarantee your genuine contractor status. In fact, it’s rare that one factor alone will determine if a contract belongs inside or outside the rules. This applies irrespective of whether a contract is three, six or twelve months long. In theory, you could work for a single day on a contract and still be classed as inside IR35.  

With this in mind, it’s important that you focus on ensuring other aspects of your contract point towards a contract for services (outside IR35) rather than a contract of service (inside IR35). Key status tests such as Personal Service, Mutuality of Obligation (MoO) and Control are likely to be more decisive in an IR35 assessment. In the event of an IR35 investigation, more often than not HMRC will scrutinise these heavily over, say, the fixed-term nature of the contract.

A fixed-term contract is also a characteristic of a Statement of Work (SoW), which a number of contractors and businesses are drawing up due to IR35 reform. An SoW should represent a genuinely contracted out service, with many consultancies that provide contractors to their clients operating under this type of contract. The IR35 rules do not apply if the SoW relates to the supply of services rather than labour. 

However, as Qdos has explained many times before, contractors should be mindful of drawing up an SoW simply to avoid incoming reform. Agencies and private sector clients, meanwhile, must also avoid creating these engagements as a workaround to the changes. An SoW needs careful consideration given it is noticeably different from a typical contractor engagement. 

In conclusion, while agreed start and end dates do point towards an outside IR35 engagement and should also be taken into account when working under a genuine SoW, it’s unlikely that an IR35 status decision will hinge on fixed term. HMRC itself talks of ‘picture painting’, alluding to the importance of standing back and looking at the overall engagement and the many different factors when deciding if a contract is deserving of an inside or outside IR35 status.

This answer was provided by IR35 specialist, Qdos Contractor.