MY IR35 Status is set by my END CLIENT

What exactly does this mean and what does it entail?

If you’ve received an IR35 determination from an end client and you believe it to be incorrect, and you’re left wondering what you should do next, we’re here to help.

What should I do if I was blanket-assessed as inside IR35 by my end client? 

A blanket assessment is when an IR35 determination is applied to all contractors of one end client without fair, individual reviews. HMRC has made their view of blanket assessments clear on the .gov website, though this hasn’t deterred end clients to date.

They state that “Your client must take reasonable care when making a decision about whether the off-payroll working rules apply. Applying a decision to a group of off-payroll workers with the same role, working practices and contractual terms may be permissible in some circumstances, but it is not right to rule all engagements to be within or outside of the rules irrespective of the contractual terms and actual working arrangements.” 

If you have been blanket-assessed as inside IR35 prior to the reform delay, you have a few things to take into account. First and foremost, it’s important to discuss the matter with your client. You should then consider a professional assessment of your employment status and educate yourself on what the rules mean for you.

If you’ve already had a determination from the client, you might find that client reluctant to overturn that decision on a whim. One of the best bargaining chips you can bring to the table is an independent third-party expert review of your contract and working practices.

Can my client stop me from working outside IR35? 

Many risk adverse clients are making short sighted decisions to place all contractors inside IR35, and simply choosing not to work with limited companies. While many clients are U-turning on their decisions once the skill shortage they face is realised and they decide to educate themselves on IR35 to be able to accurately determine status and hence attract the necessary talent to complete projects, some are still stipulating that they will only work with umbrella companies or via PAYE.

This is, unfortunately, their prerogative and that leaves contractors having to argue their case or find work elsewhere.

Is it risky to revert back to outside IR35 working? 

If your client has previously determined you as inside IR35 and you now switch back to working outside, you could fall foul of an enquiry should HMRC find out about the initial inside determination. HMRC can get hold of your client’s original Status Determination Statement (referred to as an SDS) and potentially use it against you.   

If the initial determination given by your client was a generic blanket statement, there will likely be aspects of it that can be critiqued to help prove your genuine outside status. If, however, the determination was done on an individual basis, you may find it difficult to argue your stance without hard evidence to the contrary. 

Those in the industry know that the vast majority of contractors are indeed genuine. In fact, an inside determination is often the result of a simple misunderstanding of the off-payroll rules.

Around 95% of contractors we see – from all industries, and from an ever-increasing pool – are truly self-employed and easily fall outside of IR35. Our in-house status specialists often see that misconceptions are the initial reason why a contractor may be placed inside IR35. Contractors more often than not fall outside IR35 once these misconceptions have been discussed and clarified.

In short, contractors should ensure that they are genuinely operating outside of IR35 and should be able to evidence this before reverting back.

How do you go about reverting back to outside IR35 working? 

Transferring back to working outside of IR35 is relatively simple. You should first look to confirm with your client that you are working through a limited company. This means they shouldn’t be deducting tax on your behalf but rather should be paying your full invoice amount.

Either you or your accountant can sort out your self-assessed tax payments going forward from there. There is nothing official that needs to be submitted other than, of course, your routine tax return at the end of the year.  

In essence, if you revert back to an outside IR35 status, follow your previous processes prior to the proposed April 2021 changes. ​