Ways to make your IR35 decision

If you are providing personal services to others IR35 almost certainly applies to your business.  You will now need to decide whether the services that you are providing are more indicative of an employed, rather than a self-employed, relationship with the Hirer.

To make this decision you should refer to the Status Assessment Tests, which have been established by the Courts.  You will need to consider each core and secondary test in isolation, and then step back to consider the whole relationship.

It is important to remember that you will not actually become an employee of the Hirer if the tests indicate that you have an employed relationship.  IR35 merely acts a mechanism for deciding the level of taxes that you have to pay on each assignment that you undertake.

Nevertheless, you should ask yourself, if a Hirer is not prepared to engage your services on a self-employed contractual basis, should that Hirer not be seeking permanent workers?  Therefore, is this an assignment that you actually want to take?

Once you have considered the Status Assessment Tests you then have three options in actually deciding upon your status.  These are….

Option 1 – Decide Based on the Facts

Using the knowledge gained from this site and other independent research, simply make the status decision yourself.  This is the route followed by around 80% of our clients.  We recommend that you record the reasons for your decision, and communicate these to your Hirer and Recruitment Business.  You may well find that Recruiters will ask you this based on their concerns around the Agency Workers Regulations 2010.

Option 2 – Have your Contract reviewed by HMRC

This route is one that is seldom taken by clients as they do not want to draw attention to their affairs.

Nonetheless, HMRC have a very good service that enables you to submit your contract and an outline of your working relationship in return for a formal assessment ruling.  Details can be found at http://www.hmrc.gov.uk/ir35/assistance.htm.

Naturally, you would be advised to carefully consider the outcome of such a ruling: failure to follow the opinion offered may lead to a subsequent review down the line.

Option 3 – Have your Contract Independently Assessed

This usually takes the form of an independent legal review.  Since 2000 a number of legal firms have been created to offer bespoke advice in this area.  In the early days the contract was assessed with very little emphasis placed on the working relationship.  As IR35 has evolved (see Where IR35 Came From) these legal firms have shifted much of the emphasis towards the actual working relationship between you and the Hirer.  This means that such a view can only ever be seen as an opinion, which may still be challenged by HMRC.

Many clients do seek such a review, accepting that they are not employment law specialists.  Taking such a decision is seen as the prudent position for a responsible Company Director.

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