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We know about the three main IR35 status tests, but what else is there to consider?
When determining employment status for IR35, we usually focus on the three main key status tests: Right to Substitution, Control, and Mutuality of Obligation. However, there appears to be a gap in knowledge when it comes to minor status tests. With the IR35 reform now in place, it’s critical to educate yourself on the nuances of a status determination to ensure you’re in the best position possible.
These minor status tests can be something of a minefield, so we’ve briefly outlined them below along with some useful FAQs.
It’s important to evidence that you are operating via a limited company and are therefore genuinely self-employed when aiming for an outside-IR35 determination. This ensures that, when providing a service, you are not identified as a ‘disguised’ employee of the client.
How can I show I am a genuine business?
Having a company website, stationery, and offices are some ways to prove your business is genuine. These provisions will go a long way in demonstrating you are an independent contractor.
This refers to the agreement of both the end client and the contractor entering into a contract for services.
What does a statement of intention look like?
“The contract is a Contract for Services. Nothing in the contract shall create an employer/employee relationship between Service provider and the Client.”
As a service provider, you should be providing a service on a temporary, project basis as opposed to performing an ongoing role. This means your contract should have a clear end date.
Can my contract be extended?
Yes, contracts can be extended on the provision that the extension is agreed and signed by both parties. This extension should also have a clear end date.
If you’re operating via your own limited company and are genuinely self-employed, you should remain external to the end client. This means not partaking in employee perks, not accepting equipment like laptops and phone, and avoiding sticking to the company’s regular working hours.
Can I use the end client’s email domain?
Yes, while providing the service to the client or communicating with the end client’s customers you can use the email domain allocated to you. Once the service is completed or the contract has been terminated, you should communicate via your own limited company’s email domain.
The service provider (i.e. the contractor) should be able to provide services to numerous end clients simultaneously. There should never be an exclusivity clause in a contract – that’s the remit of permanent employment.
Can I provide services to more than one client at a time?
Yes, you should be able to provide services to a number of clients at any one time.
Termination of a contract refers to ending the contract before the contractual end date.
Can I terminate the contract?
Yes, you should be free to terminate the contract whenever you want.
What should the notice period be?
A notice period of 4 weeks’ or less is acceptable.
Much like company integration, genuine contractors are external to the end client’s business and therefore are not entitled to employee benefits.
Can I take holidays?
Yes, you can but you should not be paid holiday pay. As a service provider, you should only be paid for time spent on the service.
Can I attend the work Christmas party?
Social events with work are for employees of a business so a service provider may not attend them. However, there are exceptions. If you are invited to attend, you should cover your own expenses such as food and drinks.
Can I park in the end client’s company car park?
Yes, you can (you are not expected to trek miles on foot). You are a visitor to the client so you should park in the designated visitor spaces. Having your own allocated car park space could indicate integration into the end clients’ company.
Can I receive training from the end client?
You should not receive training from the end client. If training is required, you should cover the expenses of training.
Financial risk refers to a potential loss in income through making a mistake when providing your services. This is important for distinguishing a genuine contractor as it demonstrates risk assessment when entering into a contract. It also shows that, as a self-employed worker, you are fully responsible for your work. Financial risk includes provisions like expenses and equipment.
Do I charge the client for fixing the defect?
No, you should not claim any additional cost to the client as you are liable for the mistake.
Do you supply your own working equipment, or does your client supply them upon starting your contract? Equipment refers to the tools a service provider uses in order to provide a service; genuine contractors should supply their own equipment wherever it’s to be reasonably expected. For example, it would be okay for a locum vet to use a client’s x-ray machine, but an IT contractor should supply their own laptop.
Can I use the end client’s equipment for a service?
You should use your own equipment such as laptops, tools etc in a service. However, if you are required to use a client’s equipment due to security provisions, this is acceptable from an IR35 perspective.
Expenses refer to additional payment outside of the fee for providing the service. Contractors can claim expenses from their own limited company, but they shouldn’t be claiming expenses from their client.
Can I claim expenses?
You should not be claiming expenses from the client as this could allude to an employee –benefit. Any additional expenses incurred should be covered by you as a financial risk.