How Contractors can Influence an IR35 Decision

IR35

If you’ve done any contracting work in the public sector since April 2017, you’ll be familiar with the idea of someone else determining your IR35 status. From April 2020, many private-sector contractors will experience the same situation. The decision may be taken out of your hands, but this shouldn’t leave you helpless and we’d encourage you to be actively involved in the process.

The Contractor's Guide to Demonstrating You're Outside IR35. Click here to download>>

Know what your IR35 status should be

Even if you’re not responsible for the decision, it’s still important to know what the answer should be. Due to the complexity of IR35 assessments, the best way to achieve this is to obtain a professional review from a specialist. This may be helpful when you come to discuss your status with the client or agency, and it may also flag up any changes you can make to strengthen or change your position.

In addition to getting a professional review, it may also be worth using HMRC’s CEST tool, particularly if you believe your client is likely to use it. We wouldn’t advise that you take the answer CEST gives you as gospel, as it’s been widely criticised as inaccurate since its launch, but it could be helpful to at least know what it says. It’s also worth noting that HMRC have promised to stand by the results of CEST as long as correct information was entered, so an “outside” result could be very useful. 

Strengthen your position

If your chosen specialist has assessed you as clearly outside IR35 that’s great, but if the result is less clear, or if it says you’re inside, then you’ll have some work to do. All is not lost though; in their assessment, the specialist will have explained the reasons for their conclusions. If there’s anything you can do to improve the position, either by changing the contract or your working practices, they will point these out as well. They might even be able to help you negotiate changes to the contract.

Collaborate with your client

It’s very much in your client’s interests to assess your IR35 status correctly, but if they’re badly informed or under-resourced they could be looking for shortcuts. This often means making blanket “inside” decisions as this is often perceived as the less risky option.

You can make this less likely by talking to your client and working with them to make it as easy as possible to assess your status correctly. Your independent assessment could be enough to deal with any concerns they have, and collaborating with them could make it easier to arrange any necessary changes to your contract or working practices.

The earlier and more often you communicate with your client, the more likely you are to resolve any issues and end up with the correct IR35 status. 

If you’re clearly inside IR35

Even though this article is about influencing an IR35 decision, it’s important to note that you should always be working under the correct status. Obviously, you’d prefer to be outside IR35, but working as if you’re outside when you should be inside is risky for you, your client and the recruitment agency. While it’s possible in many cases to change or strengthen your position by making genuine changes to your contract and working practices, sometimes there’s nothing you can do. If your chosen specialist assesses you as clearly inside IR35 and doesn’t believe this can be changed, it’s important that you accept this and act accordingly.

If your client isn’t interested

If your client is dead set on assessing all contractors as inside IR35, it’s usually because they don’t understand the legislation or they believe they don’t have the resources to assess IR35 status correctly.

Using blanket decisions is against the legislation’s requirement that “reasonable care” be taken, it often results in higher costs for the client or agency because they must pay employers NI, and it can create difficulties in sourcing the skills they need as many contractors are unwilling to work inside IR35. It should be clear to a well-informed client that blanket decisions are a bad idea.

If you can, encouraging your client to seek advice from a compliance expert like Orange Genie Compliance could resolve this, by helping them assess the risk and create the processes they need to deal with IR35 correctly.

Ultimately, the decision will lie with the client so if they can’t be convinced, you’ll have to decide if you prefer to work inside IR35 or source an alternative contract. Only you will know which one of those options makes the most sense.

If you have any questions about this or any issue, please contact our expert team on 01296 468483 or email info@orangegenie.com.

 

 

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