A month in to IR35: Ask Andy Answers
Here we are at the end of April. The IR35 reforms have been in play for almost a month and we’re still receiving lots of your questions for our resident IR35 expert, Andy Vessey. Kingsbridge’s Head of Tax, Andy’s 20-years-plus experience of working with legislation make him the perfect person to ask those questions to and get answers packed with insight. So, without further ado, here are this week’s questions and answers from contractors trying to make sense of the new rules.
I have a new contract, started November 2020. It’s with a Turkish company, and they invoice direct to my limited company, and then my company pays me. All this is because they have no footprint in the UK. Am I in IR35 or out?
If the off-payroll rules do not apply because your client is not a medium or large-sized company or, if it is a medium or large-sized company and has no UK connection because it is not a UK resident and does not have a UK permanent establishment, then you are responsible for self-assessing your IR35 status. You will therefore need to consider all the usual tests of employment status and might want to use the Kingsbridge status tool to assist you in determining your status. Alternatively, Kingsbridge can provide you with a more detailed review of your contractual and working arrangements.
I am engaged by a small company (Company A), who is exempt from the off-payroll rules, via an agency. The work is for a larger end client (Company B). As Company A's work is very definitely on a work package basis with company B, can company B make the determination or can I be exempt as I am engaged to work for company A on a work package?
Only if Company A is providing a genuine outsourced service to Company B, can you determine your IR35 status rather than Company B. If Company B are the true end client, however, they will be responsible for making the status determination.
I am looking at a contract for a client who is small enough to be exempt from the rules, but they are telling me that their client is insisting in the contract with them that any consultant they engage MUST work inside IR35. Is that legal. I can't imagine it's ethical or within the spirit of the rules.
If the end client is a small company then I do not see how they can insist that a contractor operates ‘inside’ IR35. The contractor is responsible for determining their IR35 status by virtue of Chapter 8, Part 2, ITEPA 2003, not the end client. The problem you might have, however, is if you are subjected to an IR35 enquiry. HMRC will place great store, in the end, client evidence surrounding your working practices, so it would be advisable to ask the end client for their reasons as to why they believe the contract falls ‘inside’ IR35 to satisfy yourself that your judgment is sound.
I am currently working on a project for a client via my limited company. The client has performed an IR35 status assessment that concluded the engagement is outside of IR35. I am working as part of a team of engineers on this project. Some of the engineers are employees (PAYE) of another limited company. They are supplied to the client on the same framework contract and have the same working arrangements as me. This is labour provision and not a contracted-out service arrangement in both cases. The client has selected individuals via a CV/interview process and has stated they have the right to reject a substitute (clearly personal service for both cases). Yet the employees of this other limited company have not received any status determination from the client. What is the reason for the difference in approach?
There is no requirement for status determinations to be made in respect of the other limited company employees as they are already subject to PAYE and NIC. They are not working through their own PSCs or a partnership which is a basic condition of the off-payroll working rules but rather employed by another company. Thus, the off-payroll working rules do not apply to these workers.
How to Ask Andy…
We’re continuing to take questions for Andy throughout May as you all get to grips with the new off-payroll rules. You can continue to submit questions through our website and Andy will do his best to answer as many of them as possible.
If you want to check your own IR35 status, whether for peace of mind or to challenge a client’s determination, our Kingsbridge IR35 Status Tool can help. For just £50 plus VAT our unique hybrid tool determines your IR35 status using your answers to 29-34 carefully crafted questions developed by Andy himself. It will give you an instant determination along with a comprehensive report and, if your status is indeterminate, your case will be passed to one of our in-house IR35 specialists for a manual review. Clever, isn’t it?