You might imagine this would be a fairly straightforward process. You may think that because you
have a limited company and the work isn’t permanent, you’re a contractor. Well, unfortunately, it
isn’t that black and white, and there’s a variety of questions you should ask to establish your
employment status.
It’s important to remember that IR35 is designed to cover a large number of scenarios. There is no
single situation to prove IR35 rules apply or not. What is important is that the contract between your
limited company and the agency or end-client, and the actual working practices you follow, clearly
show that you should not be regarded as an employee of the end-client you are providing services
to.
HMRC are becoming increasingly tough with regards to IR35 enforcement. In the public sector, they
introduced changes for public sector assignments in 2017 that put the responsibility on the end client (or agency) to determine the IR35 status of people providing services via limited companies.
This has led to an increase in the number of contracts deemed to be ‘inside IR35’ in the Public Sector
and an increase in the amount of employment tax paid to HMRC.
As we mentioned above, the
government intend to implement similar rules for most of the private sector in April 2021. This
means it’s important to be able to show that you’re not a ‘disguised employee’ of your end-client
and that you are working legitimately as a contractor through your limited company.
The first thing to consider when approaching IR35 is whether your work is controlled and directed by
you, or if you are subject to an employer/employee relationship.