Reply to: IR35 Implications of a 12-month contract

[TheFaQQer]

I hear this all the time on here that "it's not what the contract says, but what your working practices are".

I accept that, but unless HMRC come into the office with you and watch what you do, how does their investigation uncover that you're not designing a new database management system and are, infact, manning the photocopier and helping out on reception?

HMRC ask you and your client about the work that you do.

Contractor Weekly had a series of fictionalised blog posts about how an investigation looks, which are well worth a read.

[jamesbrown]

I hear this all the time on here that "it's not what the contract says, but what your working practices are".

I accept that, but unless HMRC come into the office with you and watch what you do, how does their investigation uncover that you're not designing a new database management system and are, infact, manning the photocopier and helping out on reception?

Ultimately, if necessary, by talking to your client(s) (but starting with you - and you shouldn't talk to them directly). Your clients, in the UK at least, are obligated to answer questions from HMRC about the nature of your engagement. It doesn't hurt to have a Confirmation of Arrangements concerning your working practices. I don't think you'll hear anyone say "it's not what the contract says", because the contract matters and it may not be consistent with an upper contract (in an agency arrangement) or with your working practices. The working practices are ultimately what matter if the contract is silent on something or inconsistent with reality, but a consistent and compliant contract will save a lot of time and headaches in resolving discrepancies.

[JRCT]

Agreed, it's the nature of the relationship, evidenced by working practices, that matters. A contract can be inside to begin with or at any point after that. The determination is not based on time elapsed, it is based on the facts of the case and evidence of a changed relationship, whether that takes place following a renewal (as in JLJ) or slowly during any given contract, or suddenly.

I hear this all the time on here that "it's not what the contract says, but what your working practices are".

I accept that, but unless HMRC come into the office with you and watch what you do, how does their investigation uncover that you're not designing a new database management system and are, infact, manning the photocopier and helping out on reception?

[jamesbrown]

I don't think you can assume that you are safe for any period of time - the judge ruled at after the first 3 years of that particular contract, the contractor became seen as an employee by the client. That doesn't mean that you won't be seen by the client as an employee before that point - if they treat you like an employee after three months, then that doesn't help your defence.

Agreed, it's the nature of the relationship, evidenced by working practices, that matters. A contract can be inside to begin with or at any point after that. The determination is not based on time elapsed, it is based on the facts of the case and evidence of a changed relationship, whether that takes place following a renewal (as in JLJ) or slowly during any given contract, or suddenly.

[TheFaQQer]

Good test case was: New IR35 ruling: Partial victory for JLJ Services v HMRC

Judge Howard Nolan ruled in a Bristol Tax Tribunal heard on 24 and 25 October 2011 that IR35 did not apply for the first three years of the contract, but after that Spencer had then taken on all of the characteristics of an employee.

You should be OK for 2-3 years - as long as your working practices are well outside of IR35.

I don't think you can assume that you are safe for any period of time - the judge ruled at after the first 3 years of that particular contract, the contractor became seen as an employee by the client. That doesn't mean that you won't be seen by the client as an employee before that point - if they treat you like an employee after three months, then that doesn't help your defence.

[MojoDog]

Good test case was: New IR35 ruling: Partial victory for JLJ Services v HMRC

Judge Howard Nolan ruled in a Bristol Tax Tribunal heard on 24 and 25 October 2011 that IR35 did not apply for the first three years of the contract, but after that Spencer had then taken on all of the characteristics of an employee.

You should be OK for 2-3 years - as long as your working practices are well outside of IR35.

Thanks for that, I'll look into the details of that case.

Much appreciated.

[nomadd]

That's interesting. Looking at the job description I think there's definitely potential for those factors to come into play.

Better check my Qdos subscription is up to date

Good test case was: New IR35 ruling: Partial victory for JLJ Services v HMRC

Judge Howard Nolan ruled in a Bristol Tax Tribunal heard on 24 and 25 October 2011 that IR35 did not apply for the first three years of the contract, but after that Spencer had then taken on all of the characteristics of an employee.

You should be OK for 2-3 years - as long as your working practices are well outside of IR35.

[MojoDog]

Length of contract alone has no bearing. There are related factors that do have implications, such as becoming part-and-parcel or being viewed by the client as something other than an independent contractor, so your working practices need to remain sound, as the situation can evolve from being outside to inside (with case law backing that up).

That's interesting. Looking at the job description I think there's definitely potential for those factors to come into play.

Better check my Qdos subscription is up to date

[TheCyclingProgrammer]

Length has not direct bearing on your IR35 status, although as far as the likelihood of being investigated, if I was an HMRC inspector I'd be far more inclined to look at very long contracts, mainly because even though said contract may have started out outside IR35, if it had been going on for years there is a good chance that it could have slipped inside as the contractor is more likely to have become "part and parcel". But I'm talking 3+ years, not 12 months.

[nomadd]

We need a chip-on-shoulder emoticon

Intel or AMD?

[kevpuk]

We need a chip-on-shoulder emoticon

[MojoDog]

Use Search.

EDIT: http://forums.contractoruk.com/busin...ract-ir35.html. One of the many threads on IR35 which also discuss contract length.

Use search.

That's good advice.

Thanks for your help.

[MojoDog]

OP might need a helping hand as Googling "ir35 contract duration" might be too much. Top hits from that are:

http://forums.contractoruk.com/busin...ract-ir35.html

IR35: Long Contracts - Contractor Weekly


And there's a company called HMArCey or something like that which apparently has an opinion on this:

HM Revenue & Customs: Guidance on application of employment status rules to workers using intermediaries

http://www.hmrc.gov.uk/ir35/taxbulart.pdf

Good job you were around then. Thanks for your help.

[captainham]

Use Search.

OP might need a helping hand as Googling "ir35 contract duration" might be too much. Top hits from that are:

http://forums.contractoruk.com/busin...ract-ir35.html

IR35: Long Contracts - Contractor Weekly


And there's a company called HMArCey or something like that which apparently has an opinion on this:

HM Revenue & Customs: Guidance on application of employment status rules to workers using intermediaries

http://www.hmrc.gov.uk/ir35/taxbulart.pdf

[nomadd]

Hoping for a professional, well-mannered response

Use Search.

EDIT: http://forums.contractoruk.com/busin...ract-ir35.html. One of the many threads on IR35 which also discuss contract length.