Is your house in order when it comes to IR35?

Agencies need to ensure their contractors’ working practices do not fall foul of IR35, following a ruling against courier firm CitySprint.

The ruling determined that the bike courier was a worker, not a self-employed contractor, despite a contract that suggested otherwise.

Alongside a similar ruling against Uber and forthcoming cases against other courier companies, it is further confirmation that agencies and contractors need to be rigorous about ensuring their working practices stand up to IR35 scrutiny.

People Management said, ‘While limited in their scope and subject to appeal, these cases point to a willingness among courts to apply stringent criteria to self-employed status, a trend that has implications beyond the gig economy.’

Clearly, while it is only PSC contractors working for public sector clients who will be affected by new IR35 rules come April, those in the private sector can’t afford to relax.

When it comes to IR35, everyone needs to ensure their house is in order.

What you need to know about IR35

Introduced in 2000, this legislation aims to prevent those working as limited companies from taking a dividend if they are, effectively, acting in the same way as an employee. Those caught by IR35 must pay PAYE tax and class 1 National Insurance.

In order to avoid IR35, a contractor needs to ensure that they have a number of factors (e.g. right of substitution, control, mutuality of obligation) in place – both contractually and, as the CitySprint case proves, in practice.

HMRC to introduce Employment Status Service for IR35

To help contractors determine whether they fall under IR35 rules, HMRC is developing the Employment Status Service (ESS). This online tool will calculate a contractor’s status based on their responses to a series of questions. Still at the testing stage, this tool is unlikely to be available until March.

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