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IR35 Contract Overview
Contract Terms and Conditions are the most important initial factor in determining IR35 status. If you fail to address the contract and ensure that the terms are considered outside IR35 you could leave yourself open to an IR35 Investigation and possibly a large tax bill in years to come.An IR35 assessment should be undertaken before any contractual agreement is signed and if already signed definitely before contract income is taken in the form of dividends. It is very difficult to amend contract terms and conditions once agreed so ensure they are correct before signing. A badly drafted contract can make a genuinely self employed contractor inside IR35.
To discuss an IR35 assessment or to find out about Umbrella Companies or going into business with your own Limited Company call Commonwealth Contractors now on 0800 294 4388 or Submit your details and we will get right back to you.
Agency Terms and Conditions
More often than not a contractor will secure a new assignment via a recruitment agent. If you are in this situation you will find that the agency wants you to sign off on their standard terms and conditions. If you do this without assessing the contract and making any revisions where required you could find yourself inside IR35. The problem is of course that the agency will generally be unwilling to make revisions to the contract so you may be forced into taking a contract deemed inside IR35.One of the problems with agency terms and conditions is that the agency has a standard contract between themselves and the client and themselves and the contractor. If, as a contractor you are going to make changes to your contract (Agency to Contractor) any changes really need to be replicated between agency and client. You may find this an uphill battle but a court may find contract terms and conditions artificial if they include specific clauses on one side of the agreement but not the other.
In order for a contract to be outside IR35 it must be a consultancy contract, with the service provider (contractor) retaining a large degree of control over what, where, when and how services are to be delivered. Where an agency is involved the contract will be a sub contractor arrangement. If there are any problems the client will try to claim compensation from the agency and the agency will try to claim compensation from the contractor. One of the ways an agency will try to reduce liability is by giving the client a large degree of control in the contract. This way if there are any problems the agency can say that the client had control over the contractor and therefore it is unreasonable to try to claim compensation from the agency. It is therefore very important to make back to back changes to any contract.
Contract Factors
There are a number of contract factors that must be addressed if a contract is to be considered outside IR35. For full details see the sections detailed below:- Right of Control
- Mutuality and Obligation
- Right of Substitution
- Other Factors
- Financial Risk
- Opportunity to Profit
- Provision of Equipment
- Part and Parcel of the Organisation
- Right to Employee Benefits
- Termination
- Contract Term
- Remuneration
