The Intermediaries Legislation, more usually known as IR35, was first adopted towards the start of 2000. When it was introduced, it was supposed to stop workers from avoiding paying tax, and enforce the mandatory National Insurance Contribution (NIC). It would do this by forcing certain companies to pay the same tax as their employees.
This has been an unpopular piece of legislation, especially since most UK freelancers are genuinely self employed consultants who are taking entrepreneurial risk in providing their services. A well worded contract can help them underline their self employed status. Likewise, a poorly worded contract can undermine that status at a stroke.
The easiest way to solve this is to get an expert to review the contract. There are plenty of experienced lawyers who would be willing to look it over, and the average price is just 120. Considering how important it is that you get this right, and what you will be charged if you get it wrong, it's well worth the price.
Before you send it off for review, I'd suggest you check some things yourself, just to see if there's anything that you obviously need to change.
1. If you fail, does your company bear the financial risk of it? [Yes = Good]
2. Will sound management profit your company in performing a contract? [Yes = Good]
3. Is your contract specific to you, or does your company have the right to send alternative personnel? [Yes = Good]
4. Will the risk of bad debts be born by your company? [Yes = Good]
5. Does your contract say "Contract for services" instead of "Service contract"? [Yes = Good]
6. Will you receive sick or holiday pay? [no = Good]
7. Are you an d your client related as if you were "master and servant"? [no = Good]
8. Do you have mutuality of obligations with your client? [No = Good]
If you are a freelancer, working from the UK, and everythign listed above checks out for you, then you are likely to be fine in the event of an investigation. However, be careful. It's not just what your contract says that matters, but also how it is written. IR35 investigators look very closely at the precise wording of contracts, so you need to be sure you use exactly the right phrase.
So, the first step in making sure you are completely in the clear with regards to IR35 is to contact an expert reviewer. Get them to take a look at your contract, and sound out anything that might trip you up. Just be sure you get thsi done before you put pen to paper and actually sign it.
This page has been provided by Home Loans Direct and Small Business & IR35 Contractor Accountants Antony J. Holdsworth & Co. Click here to get your own unique version of this article.
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