To ensure your contracts fall outside the scope of IR35, you need to have an IR35 compliant written contract in place, and ensure that your working practices mirror the terms of the contract.
One of the best ways to strengthen your proof of self-employment is to have a letter from your client confirming that your working practices are genuine.
A Confirmation of Arrangements letter helps evidence your actual working practices. While it does not guarantee an outside IR35 position, it can provide useful support in the event of an HMRC enquiry.
Since the off-payroll reforms, responsibility for determining IR35 status often sits with the client in medium and large organisations.
However, your working practices still remain critical, and clear supporting evidence can be valuable. See our IR35 overview for how the rules apply.
In the event that you are selected for an HMRC IR35 enquiry, the inspector will try to establish what the real working relationship is between the contractor and client, and if they are not satisfied with the information initially provided by the contractor, they may decide to talk to the end client.
This can cause problems as the client is unlikely to be an IR35 expert, and the answers they provide may undermine your claims of being ‘outside IR35’.
Why draft a Confirmation of Arrangements document?
One of the best ways to overcome this potential problem is to arrange for the client to draw up (or complete) a Confirmation of Arrangements document, which confirms what your working practices are in reality, and may help support your position in a status enquiry if drafted properly by an employment status expert.
The document will contain the client’s answers to a number of questions related to the key IR35 factors which demonstrate whether or not an individual behaves like an ‘employee’ or a ‘self-employed contractor’.
The latter would fall outside the scope of IR35, of course.
A typical Confirmation of Arrangements document will show that the contractor can provide a substitute, does not work under the client’s direct control and supervision, and provides services to the client in the style of a self-employed consultant rather than one of the client’s permanent employees.
The stronger the alignment between your contract and working practices, the more weight this type of document will carry.
One common problem you may encounter is convincing your end client to sign such a document. This is more likely to be an issue in larger organisations, where everything has to be approved by the ‘legal department’.
Employment status experts, Qdos Contractor, suggest contractors make the following points to clients if they need reassurance:
- It is not a legal document; it is used purely for tax purposes.
- Signing the document is also in the client’s best interest, as having such paperwork in place would minimise the client’s potential involvement in the event of an IR35 investigation.
For more detail on how contracts are assessed, see our guide to IR35 contract reviews.
Further Information / Example Template Download
- We recommend that you seek professional help to create a document tailored to your individual needs. Try our IR35 contract review page for some initial ideas.
- You can download some sample IR35 contract templates, including a Confirmation of Arrangements letter from the Qdos Insurance templates page.
Worried about an IR35 challenge?
HMRC investigations can be expensive and time-consuming. Qdos provides expert defence and financial cover if your status is challenged.