How is IR35 status determined?
Generally, the End-User should take the following into account:
- control and working arrangements: how much direction does the End-User have over contractor?
- substitution: can the contractor send a substitute?
- integration: how involved is the contractor on the business?
- risk: does the contractor carry on business on their own account; do they take financial risk? and
- control: how control much can the End-User assert over the contractor?
Here are some general factors to be considered where status determination is required:
Being in business as a contractor: Contractors should show evidence of their own financial risk and being in business for themselves rather than their clients. Contractors should aim to show as many of the following proofs of business on their own account as possible, as showing just one or two many not be enough for HMRC:
Company names: Contractors should never name their company after themselves, instead they should use a business name that reflects the work being done e.g. ABC Engineering and suggests that it is not necessarily a one person company.
Multiple clients: If possible, contractors should try to split their time fairly between two or more main clients, this makes it harder for HMRC to claim that the contractor is an employee of any of them.
Marketing materials: Contractors should be able to demonstrate their own marketing materials to engage new clients e.g. a website, listing on a relevant services website, or business cards. Branding should be never look similar to client branding.
Company insurance: having their own company insurance like professional indemnity insurance, is a good way for contractors to demonstrate that they are not an employee.
Office space: Having an office, even one in their own home, software licences and professional memberships in the contractor company name implies that the work carried out extends beyond the current client.
Professional development: Paying for their own training is another way for contractors to demonstrate that they are in business on their own account.