What is IR35?
An IR35 status is based on your level of risk, liability and responsibility as a worker, which will determine whether you fall ‘outside’ or ‘inside’ the legislation.
Your status will impact the amount of tax and National Insurance Contributions you pay, as well as whether you are eligible to claim back on certain expenses – if your contract shows that you work as a contractor should, then you will be classed as being ‘outside’.
If, however, your working practices are shown to be similar to that of a permanent worker, then you will fall ‘inside’ and will need to pay more tax and NICs than a contractor deemed as ‘outside’.
For more information on the guidelines surrounding the legislation, read our IR35 Rules page.
Latest IR35 changes
The most recent IR35 changes came into effect from the 6th of April 2021, meaning that the legislation now impacts those working in both the private and public sector. It also means that the responsibility to place a contractor ‘in’ or ‘out’ of IR35 is now on the client to decide, when previously, it was the contractor.
This has created issues for many self-employed professionals with some clients choosing to ‘blanket-assess’ all of their contractors as being inside IR35 so as to avoid making the incorrect assessment (and therefore a penalty charge).
What if my client is based abroad?
Some self-employed professionals will be left wondering how these changes will impact them if they’re contracting for clients who are overseas, as it could make the process of obtaining an IR35 Status Determination Statement (SDS) quite difficult.
For many end clients based abroad, the IR35 legislation may not be something that they’re familiar with, hence the concerns from contractors trying to obtain one.
This issue was noted by the government, and as a result meant that as long as the client based abroad had zero UK connections (such as a UK branch or office), the contractor could go back to the old rules of letting them determine their own status.
What is a confirmation of Arrangements?
If you believe that your working practices are deemed as being ‘outside’, HMRC may ask for evidence to prove this.
This is where a Confirmation of Arrangements document could help to overcome an IR35 status issue. It will need to be drawn up by your client, detailing your role and the level of risk, liability and responsibility that comes with it.
If a client seems unwilling to sign the paperwork, it may be worth pointing out that it is not a legal document, and it may even be in their best interest to have this in place as it could minimise their involvement should HMRC carry out an investigation.
We hope you found this page helpful. If you have any further questions, our team of experts are available to answer any queries, so give us a call on 01442 795 100 or email jaime.thorpe@dolanaccountancy.com.
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