Your IR35 checklist – things to consider and start doing now!

By Published On: 26 January 2021

The IR35 reform is coming, and there’s only a few more months before it’ll be here. So what can you be doing now to ensure you’re 100% ready?

In this blog we take a look at the IR35 checklist, to help you get prepared so you can avoid any nasty shocks come April.

Know what to do if your contract is found inside IR35

Regardless of whether your contract is public or private, from April your IR35 status determination is 100% in the hands of your end-hirer / client. If you’re found inside IR35, now is the best time to understand your options:

1: Dispute your status: Initiating a client-led disagreement allows you to dispute the status your end-hirer / client has given you. You kick off the process by gathering information to prove your status should be determined as outside. You can do this by running your contract through HMRC’s CEST tool (Check Employment Status for Tax) to see what determination it gives, and getting your specialist contractor accountant to review your contract, working practices and terms of employment. Our blog: How to challenge a client’s determination has more in-depth information on this process.

  1. Understand CEST: CEST has been created to support end-hirers / clients in determining a contractor’s IR35 status. It works by asking you to answer a number of questions about the contract and working practices, and then produces the IR35 status decision. Whilst the idea of CEST is a fantastically clever one, many believe the tool to be flawed and biased as it was created by HMRC. Testing of the tool by many has revealed mistakes, and even HMRC’s own testing has shown the tool to produce incorrect results. Whilst this sadly is the case, HMRC have stated that they will stand by any decision the tool comes to, so long as the answers given are 100% factually correct.

Should you need to dispute your end-hirer / client’s decision, then you’ll need to use CEST, so now is a good time to take it for a test run so you’re familiar when the time comes.

  1. Consider your options: If once you’ve disputed your status it’s still determined as inside, then you’ll need to consider your options:

A: Go elsewhere if that’s an option for you

B: Use an Umbrella company rather than your Limited Company for the duration of your contract

C: Continuing to contract through your Limited Company, but just pay the associated tax and National Insurance Contributions (NICs) that come with contracting inside IR35

Whatever your decision be sure to run it past a specialist contractor accountant before taking action. There might be something they’re able to suggest which you’re yet to try, or offer extra support for the path you do decide take.

Consider taking a contract that’s inside IR35

Whilst it’s not ideal, there may be a number of circumstances which could lead to you taking a contract that’s inside:

Professionally: Does it make sense to take the contract? Is there the possibility it could open the door to bigger and better clients and contracts, or could the experience be attractive on your portfolio? If the answer is ‘yes’ then it could be worth taking the contract and the financial hit, with the bigger future picture in mind.

Financially: Maybe you’re experiencing a bit of a dry spell and the contract would offer a much needed financial injection, which could carry you over until your next contract. It may be possible to negotiate a higher day rate to compensate for the additional tax you’ll be paying.

Logistically: If you reject the contract and you don’t already have a permanent role in the pipeline, then searching for a job will take up your time and effort. You’ll also be leaving the guaranteed work from the contract (albeit inside IR35), so it could be a big gamble to take.

Be sure to enlist the professional services of an expert contractor accountant

IR35 has caught many contractors out before, and even the most seasoned still won’t know the legislation and its intricacies as well as a specialist contractor accountant. Don’t take the risk of getting it wrong, be sure to enlist the services of an accountant who knows IR35 like the back of their hand.

A specialist contractor accountant will also offer IR35 services, including contract, employment terms and working practice reviews, alongside support and guidance through any client-led disagreements. Don’t wait until April’s legislation changes to seek help, find one that you’re comfortable with now that’ll support and guide you throughout.

How can Aardvark Accounting help?

Aardvark provides Limited Company contractors with everything they need to contract successfully and confidently when it comes to all things IR35 related. If you’re found inside we’re able to support you through a client-led disagreement, and suggest ways in which you could possibly tweak your contract or working practices to favour an outside determination. Or failing that and you’re still found inside, our group company, SG Umbrella can switch you over to use their umbrella services for the duration of your contract, then switch you back once you’re ready, for free – it’s that simple!

Our expert team are here to guide you, now, through April’s changes and beyond. If you’d like to know more about our IR35 services you can take a look here, or get in touch if you’d like to speak to a member of our team.

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