When trying to remain outside IR35, all freelance contractors face the difficulty of determining whether they're working on a 'self employed' or 'employed' basis for tax purposes.
This quick and easy summary will help you make the determination, and if your tax status is unclear, you'll know what you need to change.
The purpose of
IR35 is to stop the technicality of businesses hiring
"disguised" employees. A disguised employee is a freelance
contractor who is treated in every respect like an employee, but
recorded and booked as freelance - generating a tax saving for both the business
and the contractor, but without creating the small business culture
the tax differences are meant to promote.
The first thing to consider is whether you provide the things you
would normally expect from a 'business': letterheads, business
cards, advertising, promotions and so on. You should have your own
separate premises and business address, and retain other employees
rather than being completely owner-operated. All these things are
pointers towards true self employment.
The second thing to consider is control and risk. A small business
has the inherent right to send any contractor that can get the job
done, and is not required to send a specific person. They have the
right to refuse work, if desired (this is the "free" in freelance),
and provide tools and equipment at their own expense.
Finally, a small business is normally compensated on a per-project
basis rather than an hourly basis, per the T&Cs of a quote
provided in advance, and maintains signed contracts which clearly
spell out the terms of the project (hence "contractor"). If there
is any error, or rework is necessary, the small business (the
contractor) bears the risk of any related expense - potentially
resulting in a loss, rather than profit.
If all of these descriptions apply to your business, it is almost
certainly outside IR35 . If the
majority of them apply, it is likely - but not certain - that your
business is outside. It is important for any freelance contractor
to understand the distinctions, and do the proper tax planning with
a qualified specialist. Finally, it is important to remember that
your IR35 status is not set in stone and needs to be reviewed on a
contract by contract basis.