IR35 Status is not solely dependent upon contract terms and conditions. Actual ‘working arrangements’ are now one of the most important factors in determining whether someone is or is not caught by IR35.
Many Contractors think that because they have undertaken an IR35 assessment (and have agreed on paper to a contract that is Outside IR35) that they are safe from the threat of IR35; however this is not the case.
The HM Revenue and Customs can look beyond the contractual terms to the underlying working arrangements. It is desirable to have proof that the working arrangements are / were in line with the contractual terms. If no proof is available the HMRC may try to deem income as having been caught by IR35.
It is therefore very important to keep hold of as many documents as possible to prove that actual working arrangements back up contract terms. Documents should be held for at least 6 years after the completion of a contract as this is the length of time that the HM Revenue and Customs can go back in order to Investigate.
Are you a highly skilled expat Contractor? Would you like to maximise your contract income and work towards a visa extension or visa transfer? If so Commonwealth Contractors can help!
To discuss your situation with an experienced advisor call Commonwealth Contractors now on 0330 390 9021 or Submit your Details and we will get right back to you!
Conformation of Working Arrangements
It is often a good idea to get a letter signed by the client in advance of starting the contract that confirms actual day to day working arrangements. However, if the contract is via an agency, it is unwise to antagonise the agency by doing this ‘behind their back’.
The letter should include information supporting your claim of self employment and should attempt to satisfy as many of the self employment tests as possible. Not only will this provide security in terms of having a document signed by the client that confirms self employment but it also means that if the HM Revenue and Customs were to contact the client first both accounts would match.
Satisfying the Self Employment Tests
It is important to prove that you’re a self employed contractor, not a disguised employee of the Client. In order to do this you will need to satisfy and prove as many of the self employment tests as possible.
Self Employment Tests Include;
Working from Home
|If contract terms and conditions allow you to work from home make sure that you actually do so now and again and get email or other conformation from the client.|
Using your own Equipment
|Bring your own equipment to undertake the work and get the fact signed off in a letter confirming working arrangements. To provide additional security you could send emails from the computer and keep records proving that it is was used for contract work.|
|Although you may never actually invoke this clause it can be very helpful to get an email or some additional validation from the client to confirm that you can provide a substitute where required. Make a list of possible substitutes to be used in the event of actually having to invoke the clause and keep full records.|
|Keep detailed records of expenses incurred undertaking the assignment, and of any exposure you may have had e.g. the cost of paying a subcontractor to do some of the work These are but a few examples of keeping records to back up your working arrangements. You should spend some time looking at your individual working arrangements before starting any new contract and making sure that suitable documentation is in place.|
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