Probably one of the biggest questions we get asked is, “how does it affect me?”
And the answer is, “it will depend on two things.”
It will depend on the written contract you're working under. And it will depend on what your actual working conditions are.
So there are two sides to it. The contract must be IR35 friendly, but also, you must work in accordance with a contract. It's no good if a contract is a sham, or your working arrangements are quite different from what the contract says.
So what then are the main factors to consider in terms of whether the contract is IR35 friendly or not?
This is a grey area, and there's been a lot of cases over the dozen or so years that IR35 has been in place, some of which have gone in favour of the taxpayer, some of which have gone in favour of HMRC. And it's an area where there is no absolute clear answer.
But over that period of time, there are three things that the courts have decided are the most important determining factors:
The first factor is the ability for you to be able to send a substitute for the work on your behalf.
The second factor is the degree of control that is exercised over how you do the work that you're undertaking.
And the third factor is what's rather excitingly called the “mutuality of obligation”. And that basically means how much the client is obliged to offer you work and how much you're obliged to take the work that you're offered.
They are the three factors that the courts have decided the most important. It's interesting that if you look at the HMRC website, and the business entity tests that HMRC have posted on their website, that those three factors are not necessarily the most important factors in HMRC’s view, but they are the factors that the courts have decided are the most important.
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