While it will be the client that has the final say regarding IR35 from April 2020, anything to strengthen your argument that you belong outside the rules - particularly advice put forward by a specialist - should be taken seriously by your engager in theory.
You might have heard about HMRC’s IR35 tool, ‘Check Employment Status for Tax’ (CEST), which was introduced before public sector reform to help with IR35 decisions.
Given the tool has been dismissed in an IR35 tribunal, ignores key aspects of the legislation and relies heavily on the right of substitution in an engagement, we strongly advise you not rely on an answer provided by CEST.
Confirm your working arrangements
In the lead up to further IR35 reform, you can look to obtain a Confirmation of Arrangements (CoA) letter, which effectively confirms that you and your client are in agreement of your IR35 status.
Given a CoA should reflect the true nature of your contract and not what was agreed at the start of your working relationship, they are taken seriously by HMRC in the event of an IR35 investigation. And should your client agree to sign a CoA, it would become quite difficult for them to immediately place you inside IR35 upon the arrival of reform next year.
Collect evidence
As further IR35 changes approach, contractors are advised to collect evidence that signals they are genuinely self-employed and run a business in their own right.
While the terms and conditions of a contract will usually be more telling when deciding if your engagement sits inside or outside IR35, anything that indicates you operate as a legitimate business will help your cause - whether when assisting your client in setting status or when challenging inaccurate determinations.
For example, demonstrating that you take on financial risk and are liable for any mistakes when working with your client is important - business insurance indicates this.
The use of your own equipment, not your client’s, is another sign - although not a definitive one - that you might be in business in your own right and not an employee. As is having your own office address, company website and even company stationery.
Above all else, for contractors to deservedly sit outside IR35 and be able to continue paying themselves marginally more tax efficiently through their own limited company, it is imperative that their actual working practices reflect that of a contract for services - in other words, a business to business engagement.
Looking ahead to the introduction of changes, contractors, who are understandably concerned about the arrival of private sector reform, should not panic.
The draft legislation for IR35 reform in the private sector has now been published, which at least gives all parties involved a clear idea of exactly what HMRC has in store for next year.
