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"Is there a way to avoid IR35" is a popular question that contractors often ask. Particularly with the implementation of the rules for off-payroll working in the private sector which came into force on 6th April 2021. For the past year there has been a scramble to find ways in which limited company contractors can arrange their affairs so that they appear to be working outside IR35.
However the upfront answer to the original question is, you can’t avoid IR35. It’s the details and circumstances of your assignment and the way in which you work that will determine whether or not you are ‘inside IR35’ or ‘outside IR35’.
So, if you’re looking for help on how to avoid IR35, our advice would be to stop looking. As of April 2021, the decision as to whether you are likely to be working inside or outside IR35 will generally rest with your end client (if they're a medium or large sized business). Your client should make that decision based on the facts of your current or prospective engagement.
However, there are certain things you can do to ensure that your client takes into account all the factors, on which a status decision is taken. Bear in mind that if you act, behave and are treated as an employee then in HMRC’s eyes you should pay tax and National Insurance Contributions as an employee!
Yes, sending a substitute that you source and engage through your limited company is a positive indication that you are not providing personal services. However, please be mindful that it may not be sufficient merely to have the right to substitute in your written contract. It has to reflect the reality of your working circumstances.
Not necessarily. You need to understand further detail regarding the service, and thoroughly review the contract. If your company is delivering services on a specific project for a set time frame with clear deliverables then the role may well fall outside IR35.
Yes, potentially. If the end-client treats you as just another member of its workforce you may well be considered as an employee for IR35 purposes. It’s important at the outset that the client accepts, and the contract shows, that your limited company has been contracted for a specific and clearly defined service.
Yes, it is helpful, though only one of several factors that IR35 looks at. Self-employed people bear financial risk in conducting their business whereas employees do not. Therefore, this is an indicator that you are working outside IR35.
Yes. This state of affairs indicates that you are being considered as being part and parcel of the organisation and therefore being treated as an employee. This tends not to be the case with contractors working outside the scope of IR35.
Yes. It can be a positive indicator that you are operating outside IR35 where your company engages with multiple clients, either simultaneously or one after the other, If your company one client for an extended period of time this does not necessarily mean you fall inside IR35, but you should reflect on the engagement as a whole and consider whether the client is beginning to treat you as one of their employees.
To begin with you need to have a review of how your working practices are conducted. It is no use if the contract says one thing, but the reality is that you do something different. HMRC insist that any evaluation of status is based on the reality of the engagement, not the theory of how it should be operating.
Furthermore, if your client is a medium or large sized company, your client should have provided you with an IR35 status determination statement.