To successfully avoid IR35, both the terms of a contract for services, and the working practices of the individual providing these services must demonstrate that the worker is in business on their own account, and not merely a disguised employee. Here are some useful IR35 contract resources from around the web.
Since 2000, when IR35 was implemented, a burgeoning ‘IR35 industry’ has built up, with a multitude of accountants and employment status experts happy to provide IR35 contract reviews, or to encourage contractors to go down the umbrella company route as a ‘hassle free’ alternative to being an IR35-caught limited company contractor.
The contract itself should be able to show that the assignment is compliant with IR35 in that it satisfies most of key IR35 factors, such as the right to provide a substitute, that the worker does not work under the complete control of the end client, and that the contractor does not expect to be provided with more work when the contract in question expires.
What is a so-called ‘IR35 friendly’ contract?
Of course, an ‘IR35 friendly contract’ refers to a contract to provide services which demonstrates that a worker is free from IR35. Whilst many agencies promote their contracts as ‘IR35 friendly’, each engagement should be reviewed individually, including the working practices, and the term ‘IR35 friendly contract’ should not be relied upon.
Important points related to IR35 contracts
- The contract between contractor and agency (or end client if working direct) should demonstrate self-employment.
- The lower-tier contract (contractor-agency) should mirror the terms of the upper-tier contract (agency-client).
- The contractor’s working practices should mirror the terms of the contracts, i.e. that he/she works in a manner more akin to a self-employed individual, than to a permanent staff member, which could indicate that he/she is a ‘disguised employee’ (as per the HMRC term).
- We would recommend using a specialist IR35 contract review provider before starting a new contract, as they will be able to negotiate contract clause changes with recruitment agencies, as well as providing an opinion as to your risk of an IR35 investigation.
IR35 contract template resources
Qdos Contractor has a variety of free templates which may be useful to contractors, including model contracts for contractor to agency, and for contractor to client (if working direct), an example HMRC enquiry letter, how to survive an IR35 enquiry, and more. You can access these templates here.
IPSE (formerly the PCG), which has provided the main business opposition to IR35 since its inception, provides a wealth of resources to members, including the ‘essential freelance toolkit’ which contains IR35 friendly contract templates. Visit the IPSE site here to find out what benefits member receive (you’ll need to sign up as a member first before you can access any downloads though).