We know about the three main IR35 status tests, but what else is ther to consider?
When determining employment status for IR35, we usually focus on the three main key status tests: Right to Substitution, Control, and Mutuality of Obligation. However, there appears to be a gap in knowledge when it comes to minor status tests. With the IR35 reform now in place, it’s critical to educate yourself on the nuances of a status determination to ensure you’re in the best position possible.
These minor status tests can be something of a minefield, so we’ve briefly outlined them below along with some useful FAQs.
It’s important to evidence that you are operating via a limited company and are therefore genuinely self-employed when aiming for an outside-IR35 determination. This ensures that, when providing a service, you are not identified as a ‘disguised’ employee of the client.
This refers to the agreement of both the end client and the contractor entering into a contract for services.
As a service provider, you should be providing a service on a temporary, project basis as opposed to performing an ongoing role. This means your contract should have a clear end date.
If you’re operating via your own limited company and are genuinely self-employed, you should remain external to the end client. This means not partaking in employee perks, not accepting equipment like laptops and phone, and avoiding sticking to the company’s regular working hours.
The service provider (i.e. the contractor) should be able to provide services to numerous end clients simultaneously. There should never be an exclusivity clause in a contract – that’s the remit of permanent employment.
Termination of a contract refers to ending the contract before the contractual end date.
Much like company integration, genuine contractors are external to the end client’s business and therefore are not entitled to employee benefits.
Financial risk refers to a potential loss in income through making a mistake when providing your services. This is important for distinguishing a genuine contractor as it demonstrates risk assessment when entering into a contract. It also shows that, as a self-employed worker, you are fully responsible for your work. Financial risk includes provisions like expenses and equipment.
Do you supply your own working equipment, or does your client supply them upon starting your contract? Equipment refers to the tools a service provider uses in order to provide a service; genuine contractors should supply their own equipment wherever it’s to be reasonably expected. For example, it would be okay for a locum vet to use a client’s x-ray machine, but an IT contractor should supply their own laptop.
Expenses refer to additional payment outside of the fee for providing the service. Contractors can claim expenses from their own limited company, but they shouldn’t be claiming expenses from their client.