5 IR35 Questions to Ask Yourself

IR35 impacts contractors every year in the UK. Many simply ignore the legislation and hope it doesn't affect them. This will leave you with very little evidence against HMRC if they decide to label you inside IR35.

The last thing you want is a backlog of employment taxes and national insurance.

So here are five easy questions you can ask yourself to check your IR35 status. Of course this isn't an exhaustive list but it'll give you a pretty good idea without being an expert.

And if you happen to be walking on the borderline of in or outside IR35, you can start making better decisions that would highlight your work as a contractor rather than an employee.

1. Am I being controlled by the client?

I'm sure you've heard this one before, but what does it actually mean? There's no problem with taking reasonable instruction from the client. For example if you're a graphics designer and your client wanted a different design to your original concept, then that's completely fine.

The problem lies when you are told what to do by the client with step-by-step instructions.

So if you're working on a piece of software and your client keeps giving you exact instructions on how to build it, this could be seen as an employment arrangement.

You wouldn't hire a plumber to work on your leaky sink, only to guide them the entire time. No way! You'd simply check that the leak is fixed when they finish. And if it isn't... they'd better come back and fix it for free. The same goes for your contracting role.

Just because you may be controlled by the client doesn't mean you automatically fall inside IR35 - it takes many factors to fully decide your status.

2. Do I bring tools & equipment owned by my own company?

This is a straightforward question. If your limited company owns tools that you regularly use to provide services, then it's a great plus to your 'outside IR35' status.

In some cases it's actually OK to use client equipment. Let's say you need access to a secure server that's only available on an in-house computer. Using this computer won't negatively impact your status. It's purely for security reasons.

Generally speaking HMRC doesn't count laptops or phones as your company's equipment from an IR35 perspective. But more separation from your client is always better. And if your company only provides services with computers (anything IT), then this would get weighed more heavily in an actual dispute.

3. How am I identified at my client site?

Another really simple one. The way you're identified by employees of the client and their customers can give you some serious perspective about your status.

Being identified as an independent contractor or even better, as an external company on site can show that you are clearly outside of IR35. Especially if your client's customers also know about your working arrangement.

So if you have a special email address to contact customers with, just ensure you've been labelled as a contractor or working for your own company.

Pro tip: It's also helpful to list yourself as a company director or contractor on social networks like LinkedIn.

4. Does my contract have an end date or project goal?

Having an end date for your contract is a good indicator the client only wants your company's services on a temporary basis - not permanently. It also implies that once the contract is fulfilled, you're not obligated to stick around. And if the client wants to, they can ask your company to stay on longer - otherwise known as an extension.

Projects are great too, since it shows the client has hired contractors that won't be integrated into their workforce. The contractors are simply there to provide their expertise until the project is completed.

However, a rolling contract has less separation from an employment contract. You're contracted until further notice which could put you in a risky position for IR35.

5. Do I provide services outside of the original contract?

Although there's nothing wrong with a client asking your company to provide other services, it becomes an issue when there isn't a new contract in place to include them. This sort of treatment is dangerously close to an employment relationship.

Let's say your company has been contracted for a software development project. The client decides they need more staff to handle their logo redesign so they tell you to work on that instead.

An employee would just need to go along with it, no questions asked.

You, the contractor on the other hand would first get the full details of this new project and ask for an amended contract. Alternatively you could ask for a second contract and send one of your own employees to do the logo redesign, or even sub-contract the work out to another company.

More IR35 tips

It's essential to know what HMRC looks for when deciding your IR35 status. This way you can adjust your working practices and contracting arrangements to fit with what HMRC expects from contractors - from you.

You can try out HMRC's Tool as a quick check of your status. Answering each question honestly will give the most accurate result.

Contract reviews are also a great way to reduce your risk of being caught. An IR35 expert will be able to identify any issues in your agreement. This way you'll have the chance to request that your contract is adjusted, or simply find a different client to work with.  Read on>> What is IR35? - IR35 Explained

WORRIED ABOUT YOUR IR35 STATUS?