Have you heard a variety of claims about IR35 that seem to make sense but you’re just not sure if they’re true? We’ve rounded up a few common IR35 myths we’ve heard and want to debunk them for you. The legislation is complex as it is without these IR35 myths and assumptions being added to the mix, so we wanted to provide some clarity to the situation. Keep reading below for 5 IR35 myths we’re going to demystify:
“My contract is written to be airtight as outside IR35”
This is one of the most common IR35 myths (or perhaps wishful thinking). But, unfortunately, there is no such thing as an ‘airtight’ IR35-friendly contract. You should ensure that your contract is clear but IR35 tribunals heavily depend on your working arrangements in practice and not just what is written in your contract. So you must be able to carry out the agreed upon arrangements in your contract.
For example, if there is a clause in your contract, which underlines your right to substitution, you must be able to exercise it in your working relationship with your end-client. HMRC has the power to get in touch with your end-client, and if the client does not acknowledge that you have the autonomy to send a substitute in your place, then any substitution clause in your contract will be disregarded.
“I have more than one contract, so I can’t be inside IR35”
Having multiple contracts does not give you an automatic status as outside IR35. Each contract must be assessed individually, and so you could find that certain contracts fall inside IR35, while others fall outside of it. In the public sector, public bodies have been making blanket-IR35 decisions, however, if you are a contractor in the private sector, you are advised to complete an IR35 assessment on a contract-by-contract basis. Your working relationship from one end-client to another could be very different, and so your IR35 status could be different as well.
“Other contractors I work with are outside IR35, so I must be too”
As noted above, just as every contract is assessed on an individual basis, your relationship with your end-client must be evaluated separately. You must not assume that your situation is the same as that of your colleagues and you should never determine your status based on the result of others, as your contract and working arrangements with the end-client could be different (and your colleague might even be wrong!)
“I must be inside IR35 as I work with a line manager”
This isn’t necessarily true as it is commonly acknowledged that most projects have a manager or coordinator appointed to the assignment to ensure it runs smoothly. What’s more, the line manager can ensure the work is progressing as agreed upon in your contract. However, if the manager is also able to exert control and direction over your work, such as involving you in an internal appraisal system, you may be considered inside IR35.
“IR35 hasn’t been rolled out in the private sector so I don’t need to worry”
While the legislation hasn’t yet been applied to the private sector, contractors are strongly advised to prepare for the reform now, even without a clear date set in stone. This way when the legislation is eventually implemented, you will be ready for it and will be in a better position to safeguard yourself. You should make sure to get a good understanding of your IR35 status and if you’re outside of IR35, be confident that you have sufficient evidence to support your claim. So, start gathering proof – wherever possible – that affirms your IR35 position.
We of course, also recommend you to get guidance and advice from an IR35 expert, such as our partners, Bauer and Cottrell. The IR35 legislation is extremely complex so having the support of a specialist can be nothing but helpful.
If you are working in the public sector, caught inside of IR35 or simply do not want the trouble of running your own limited company, contact the team at Cloud9 Umbrella. We can take the hassle out of contracting and look after the administrative burden for you.
For directors of their own limited company, our partner company, K&B Accountancy Group, are contractor accountants who offer an Essential IR35 package, which specifically includes IR35 advice, review and protection from our partners and IR35 experts Bauer & Cottrell.