IR35 & The Private Sector (Factors HMRC Will Consider)
This article provides some general advice on procedures and working arrangements to check your situation against which will help support your justification of providing services under a PSC / Limited Company as an Independent Contractor in the eyes of HMRC.
You may be aware that contracts for public sector bodies are already subject to more stringent IR35 tax avoidance rules but what about the Private Sector. This includes Independent Contractors for private sector firms.
At present if you work on projects for larger businesses through your own personal service company (PSC created through a Limited Company), you may pay less tax and National Insurance Contributions than would be paid overall if you were an employee of those businesses.
Recently there has been several IR35 cases heard at the tax tribunals. HMRC won one concerning a TV presenter, but in three other cases the taxpayers were successful.
If you provide services through your own PSC and don’t want to pay more tax than you have to, make sure you retain evidence of your working arrangements to support as many of these as possible:
You can refuse to accept the contract and terminate it on your terms
Your customer is under no obligation to provide you with work
You have the right to send a substitute to work in your place
You can hire others to help you with the task
You have control over how, where or when you perform the tasks
You are treated differently from your customer’s employees
You provide at least some of your own equipment
You take on financial risk, by (say) having to correct work in your own time
You can work for other customers concurrently
You and your customer do not intend to form an employer-employee relationship
It is worth mentioning that there are proposed changes to the IR35 rules from April 2019 which may make it more difficult to prove you are an independent contractor but the exact nature of these rules remain to be seen.