As a general rule you will probably fail the HMRC definition of self-employment and are 'caught' by IR35 legislation if you:
- only have one current contract;
- travel to the same workplace each day;
- are paid at an hourly or daily rate;
- are unable to sub-contract (i.e. you are unable to send in a replacement to provide your services, in the event that you are unable to work);
- receive the same perks as direct employees (i.e. discounted staff canteen, shop).
The IR35 Test
HMRC look at an employment contract and may decide that it is not a true reflection of the work being carried out. The overall picture is mainly determined by the working practices of the individual, made up by how you operate on a day to day basis and the aim of the test is to determine whether or not you are effectively an 'employee'.
The HMRC will consider factors including:·
- What is the client's business?
- Is there a written contract in place, and what is the length?
- What are the terms of the contract - e.g. does the contractor have a notice period, the hours of work, where and how is the work carried out?
- Does the contractor have any financial risk from working on the project?
- Is the contractor working exclusively for one client only?
- Does the contractor use their own materials/equipment on site?
- Does the contractor have to rectify work at their own expense?
- Can he or she provide a substitute worker to carry out work in place of themselves?
- Is the contractor "part and parcel" of the client's organisation?
- Is the contract project based with deliverables and milestones?
- Is the worker paid by the job/project or like an employee at fixed wage at a fixed wage?
- Are any employee type perks provided? (company car, sick pay, bonuses etc.)
- Has any government department (HMRC / Contributions Agency) ever provided a written status ruling in the past?
If you are unsure about whether you are caught by IR35 contact HMRC, if it is found later that you have been incorrectly operating outside of the legislation then you will be charged for the additional tax, NICs, interest and penalties