Most contractors will prefer to work outside IR35 for the not just to benefit from the tax rates available to businesses, but also to ensure they don’t lose out on money which needs to go towards their pension or the running of their PSC. The most likely disputes will arise when the engaging company incorrectly determines that the contractor is inside IR35 – sometimes meaning the contractor is significantly worse off than a regular employee.
From 2020 a process to help correct this has been proposed, but is still in consultation. The proposed process would see contractors challenging their IR35 status with the engaging company, who would have 45 days in which to respond defending their status decision. This proposal has received heavy criticism because at the end of the process, correct or incorrect, the engaging company has the final say and there is no further complaint procedure which would see an external expert ruling on the contested decision.
For many contractors, IR35 status of a contract will now become a key factor in their decision to work with a company, and we would encourage contractors to confirm the IR35 status of a contract before signing. The following points can help you to determine whether your contract should be inside or outside IR35, and may help your potential employer to make the correct determination before you sign your contract.
|Inside IR35||Outside IR35|
|Are you paid on the basis of time spent?||No||Yes|
|Are you given set hours to work?||Yes||No|
|Are you allowed to supply a substitute to do your work if ill or on holiday?||No||Yes|
|Do you attend staff parties or meetings?||Yes||No|
|Is the engaging company telling you how to carry out the work?||Yes||No|
|Do you supply your own equipment?||No||Yes|