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Key Factors in Determining IR35

You will be aware that there are IR35 reforms occurring in the public sector in April. The legislation itself is not changing; it is just the responsibility for whom determines the IR35 status of an assignment that is changing. The key factors that determine IR35 status should still be the same, but do you actually know what they are?

To determine IR35 status, the most important factors considered are the following:

• The requirement for personal service – whether you can provide a substitute or not
• Control & supervision – this is basically whether someone has the right to tell you how to do your work
• Mutuality of obligations – whether there is an obligation for both parties to provide work and do work

If you cannot provide a substitute, and someone does have the right to tell you how to do your work, and there is an obligation for either party to provide work or do work, then your assignment will almost certainly be caught by IR35.

To establish whether or not your assignment is caught by IR35, the following will be looked at:

• The contract for services – whether there is an agreement within it around providing a substitute; whether it is made clear that the client does not control the manner by which the services are provided, etc.
• Working practices
• Upper contract – this is the contract between the hirer and the agency, although this is not usually looked at unless in a court case

There are also other factors that can help in determining IR35 status:

• Are you ‘part of the fabric’? – This looks at the length of time that you have been doing work for that particular client
• Financial risk – If there is financial risk, then there is an indication of an agreement for services rather than an employer/employee relationship. For example if there are faults in your work and you have to correct these faults, then there is financial risk
• Need for insurances
• Use of own equipment
• Intention of parties – It should be clear that both parties understand the terms on which the assignment is based, this would ideally be expressed within the contract

To help determine IR35, there will be an online tool available to use. If you are in the public sector and are found to be caught by IR35 from 6th April 2017, then your agency will have to change your contract.

For those inside in the public sector, it is important to also know exactly how the IR35 reforms will impact you and the accountancy solutions available – we have covered this here. Even if you are in the private sector, it is still important to know about the IR35 reforms as many believe that the reforms will also be rolled out to the private sector in 2018 or 2019.

If you would like to know more about IR35, then please feel free to contact us on 0800 195 3750 or email webenquiry@icsuk.com

One thought on “Key Factors in Determining IR35”

  1. Isobel Boyes says:

    What do you mean ‘provide a substitute’ – a substitute member of staff should you be unavailable, is that what it means??

    Also, must you be able to argue ALL THREE points listed, or is it acceptable that if you can argue one or two, that you would be outside of IR35?

    In what arrangement/scenario would you be able to say that you are not controlled by the client? Are you able to give an example.

    Is there any difference between directly invoicing the client or that invoicing coming through an intermediary agency???

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