Specialist insurances and IR35 advice
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A contract should mirror the actual working practices you and your business undertake when engaging with the end client. However, the ‘true’ contract is not the written one but the one that the review of the working practices reveals. This holds vast credence with HMRC during an IR35 status enquiry, as HMRC view the working practices as your actual working relationship with the end client. During an IR35 status enquiry HRMC will contact your end client(s) and ask them about what did transpire and what could transpire if a situation arose around the terms of the contract, therefore ensuring that your working practices match the terms of your contract is essential in establishing your IR35 status – there is no fooling HMRC.
HMRC will attempt to establish if the relationship between you and the end client is disguised employment or not, so it is crucial that you are in business in your own right and can demonstrate that you provide your services to them with the autonomy any normal business would. However, the written contract between you and the end client might be perfect from an IR35 perspective, being exemplary in demonstrating key clauses such as substitution, mutuality of obligation, non-exclusivity and control, but unless it can be proved what would happen in reality it is worth very little in defence of your case. This is where the working practices review comes in, and can be back up by the Confirmation of arrangements document.
An example of working practices is best highlighted with the right to provide a substitute. It is highly unlikely you have every had to provide a substitute, even though you contractually have the right to do so. How would the end client actually react and would they allow it? An end client should only refuse your right to provide a substitute on reasonable grounds, this being things such the substitute not having the required qualifications, experience or security clearances etc. Therefore, whilst a contract with fantastic substitution clauses may appear perfect, it is insufficient on its own as HMRC will want to review and establish if you can actually provide one in practice. In the infamous Dragonfly v HMRC case which HMRC won, the defendant (the contractor) was found to have well drafted IR35 clauses in their contract, but when it came to the crunch they did not mirror the true reality of the working practices, which led to a £99,000 liability judgement against them.
To ensure maximum protection and to belt and braces your position you should get the end client to provide written confirmation of your working practices, which can be done by completing the Confirmation of arrangements document.
All contractors in business today need to be proactive and show that they have taken reasonable steps to understand IR35 and ascertain their status accordingly. By using our vastly experienced in-house expertise you can ensure you put yourself in the best position to avoid being caught on the wrong side of IR35 by having your working practices reviewed.
If you already receive, or choose to add the IR35 Working Practices Review to your order, you should complete and submit this to us online. This can be done by clicking here.
Copies of your contract and any other supporting documentation is uploaded online. This can be done by clicking here.