OK, so the ability to work outside IR35 is not entirely in the hands of the freelancer or contractor, but there are steps you can take to put yourself in the best position.
It is often said that the easiest way to operate outside IR35, is to work in a way consistent with being outside IR35, but genuine contractors will find themselves having to defend that position.
Let’s take a look at that…
What Is IR35?
IR35 is UK tax legislation designed to ensure that freelance or contract workers pay the right amount of tax. It is particularly focused on ‘disguised employees’.
Up until April 2021 in the private sector, responsibility for determining whether a contract is ‘Inside’ IR35 and subject to PAYE tax, or ‘Outside’ IR35 and paid howsoever the freelancer sees fit, lies with the freelancer.
That’s all going to change!
All clients who use contractors, as of April 2021, have a primary legal obligation to assess the contract in advance and determine its IR35 status. If you want to work outside IR35, you need your clients to agre to outisde IR35 working practices, and contracts that reflect them.
So What Does IR35 Mean for Me?
If you’re a contractor or freelancer, it means you’re in for an interesting time! We saw a trial run of this in April 2020, leading to considerable pain for all concerned!
Clients will become concerned, and many will judge you inside IR35 simply to avoid responsibility for any consequences.
If you want to be treated fairly, you need to be prepared to prove you are operating as a business.
Freelancer’s Friend can help you collect the evidence to support or challenge an IR35 determination.
Protect Your Business in 5-Steps
1. Review Your Contracts!
Start by reading the contract! You’d be amazed how many people don’t bother. Look out for any clauses that frame you as an individual rather than a business.
Every contract you work on will be assessed by the client. Some clients may involve you in that process and some may not.
Pay experts to review your contracts if you are unsure, professional advice may cost money, but it costs much less than finding yourself the wrong side of the legislation.
If you want to work Outside IR35, do not take contracts that place you Inside IR35. Simple, right?
HMRC have developed a Check Employment Status for Tax CEST tool, giving the contractor the tools to check status. Do it, but do not rely solely on the determination!
Freelancer’s Friend is designed to help you collect the evidence to support or challenge an IR35 determination.
2. Understand How You Deliver Services
Con-tracts come with con-text. The decision makers in this, be they HMRC or client, have a crafty knack of using the contract when it suits them.
And they prefer to reference working practice when that fits their narrative.
So, consider how you work day to day – have you got a manager? Do you have to work in a certain place? Are you told how to deliver your services?
All these will place you Inside IR35.
Or perhaps you are highly skilled, autonomous and free to work how, where and when you see fit.
That would likely put you Outside IR35.
Freelancer’s Friend will guide you in building a portfolio of evidence for each contract to support your assertion you are Outside IR35.
3. Keep Detailed Records
Whether your goal is to challenge an Inside IR35 determination, satisfy yourself that your own determination is accurate or demonstrate to a client that your contract and working practices are provably Outside IR35, Freelancer’s Friend is here to help you.
Keep key documents securely in one place. The document set Freelancer’s Friend helps you build provide both evidence of working practice and context for the written contract.
Add your own notes to support your assertions, and collect proof to support them.
Get each of your contracts to 100% document set completion for maximum peace of mind, and the most defensible position available to you.
Freelancer’s Friend supports contractors and freelancers operating their own businesses, with all the supporting information available.
4. Collect Evidence
Contracts, CEST assessments and professional reviews of contracts are fantastic – but ALL can be undermined by your working practices!
Do you use the staff car park and subsidised canteen? Maybe you enjoy all the office social events and have your name on the office door. If you’re doing that, STOP!
If you’re operating as a legitimate independent business, make sure you can demonstrate that in your actions.
Better yet, collect evidence of those behaviours.
Email examples of refusing work, declaring unavailability to work over requesting annual leave. Upload those emails securely to Freelancer’s Friend to build a picture of an independent business.
Collect examples of your working without supervision or direction, evidence the absence of management control and demonstrate independent working. All the proof you need of your working practices can be at your fingertips with Freelancer’s Friend.
5. Be Prepared!
The changes to IR35 are coming. If you’ve been contracting for any time at all you will already have had a taste of what is to come.
If you’re already clearly Inside, it is time to make a change – be it permanent work or a change in client and working practices.
You do not want an ‘Inside’ contract, to get taxed like an employee without any of the benefits of being an employee. Crazy!
If you want to stay an independent contractor Outside IR35, be prepared to prove your status!
With a full contract document set, Freelancer’s Friend can put you in the best possible position to:
- Challenge an Inside IR35 determination by a client.
- Defend yourself against an HMRC Inside IR35 determination.
- Evidence your own Outside IR35 determination.
- Recover taxes paid owing to an incorrect ‘Inside IR35 determination.
Pretty cool, right? And all you had to do was upload documents you already have, as well as create and collect a few helpful extras.
Fre
Freelancer's Friend is all about YOU!
And more specifically, it’s about you protecting the business you have personally invested in over your working life!
After all, you’re best placed to protect your business and its interests. Information is power!
5 Ways Freelancer’s Friend powers
YOUR Business!
- First, Freelancer’s Friend is flexible to meet the demands of YOUR business. Gather the information you need, and add anything you want!
- Keeping a robust set of documents and evidence can help you operate Outside IR35 with confidence.
- Operating Outside IR35 allows you to carry on running your business independently, so you can pay yourself as you see fit and operate your business as a Director, not somebody else’s imagined ‘employee’.
- It’s FREE! And no, there isn’t a catch. We’re contractors ourselves, we want to give back to the community and help where we can. We realised we needed to keep better records ourselves, and figured we might as well share our system.
- It’s easy to use and ALWAYS available. Cloud-Hosted and secure, no subscriptions or tie-ins. Get yourself over to Freelancer’s Friend start safeguarding your future business TODAY!
P.S - The TL;DR Version
Work Outside IR35 for an Independent Future!
To safeguard yourself and your business against the looming changes in legislation, be prepared!
Review your paperwork, engage with your clients proactively and positively, collect documents and evidence to prove your IR35 status. And be prepared to be challenged. Freelancer’s Friend can help you with all of that, and it is completely FREE!
Freelancer’s Friend is free because we’re passionate supporters of the freelancer and contractor community, and we want to see legitimate businesses succeed! Sign Up completely FREE at Freelancer’s Friend.
The Freelancer’s Friend App was built by freelancers, for freelancers. Designed to help you stay one step ahead of the challenges of modern contracting. Designed and developed by Black Chili / Ortera.