Contractors’ Questions: What now my contract’s been found inside IR35?

Contractor’s Question: I'm new to the country and have been set up as a limited company to work as a contractor. I have recently discovered that the contract I am currently fulfilling is in fact ‘inside’ IR35 (when the whole time I thought it fell ‘outside’). What are my next steps?

Expert’s Answer: Whether IR35 applies or not depends on a variety of factors, such as a requirement to undertake the services personally; who has the ultimate right of control as to how, when and where the services are to be carried out and, crucially, if the capacity of the client is that of a customer of your business.

It is not clear from your question who made the decision on IR35 status, but with appropriate advice and representation, employment status can be successfully challenged.

If your client is a public sector body (such as a government department) and has made a ‘blanket’ decision that IR35 applies, then you can challenge this decision by providing evidence that the engagement clearly constitutes self-employment with reference to the above factors. If the public sector body refuses to co-operate, then it is open for you to demand a higher rate to compensate for the additional tax.

Generally, if you are undertaking a specific job title for a fixed term and have otherwise been treated in the same or similar manner to an employee, then IR35 will apply, but the Tribunal alone is the final arbiter of IR35 status.

The expert was Martyn Valentine, founder of The Law Place, an IR35 and employment status advisory.