When carrying out a contract review we are looking to establish whether any of the three pre-requisites to employment are missing and that the status of the relationship between the parties is therefore one of self-employment. The 3 pre-requisites are:
- An obligation for the worker to provide personal service
- Mutuality of obligations between the parties
- Sufficient control to create a master/servant relationship
Although you may be named in the schedule as the Individual who will provide the services the contract should allow a Substitute to be appointed to perform the services. Personal service is not therefore required.
The right to select the substitute and the responsibilities with regard to paying and ensuring that the substitute is suitably skilled is therefore that of the Consultant.
If there is no obligation for further work to be offered or accepted and then there is no mutuality of obligations beyond the assignment.
In addition we have to look at the obligations of the parties during the period of the assignment and the conditions under which it can be terminated.
A good defence against IR35 is that there should be no obligation for the client to provide work to the Consultant for the period of the assignment.
Clauses such as “the Consultant the Individual(s) and any Substitute are entitled to exercise reasonable discretion in the manner of the performance and in the organisation of the Services.”
are useful for IR35 purposes as they indicate that there is no control over the Consultant or its workers.
Other useful clauses in the contract may refer to the Consultant’s expertise and specialist services which tend to suggest that the client will rely on the Consultant’s ability to carry out the work rather than controlling how it will be carried out.
A clause should detail the financial risk and include a requirement on the Consultant to have insurance in place to cover its liabilities.
- There should be evidence of a business to business relationship in that a
VAT invoice will be issued for payment of services rendered and payment
will be made on a payment policy of 30 days net monthly (for example)
- The Consultant and the individuals performing the services can carry out
other work during the period of the contract provided there is no
conflict of interest.
- The Consultant should provide such tools and equipment as necessary for the performance of the Services.
- The intention of the parties is that there is no contract of employment
Although the intention of the parties is insufficient on its own to
defeat an IR35 challenge it is nevertheless useful to have in a
AccountsNet are a PCG Accredited Accountant, and our staff undergo regular on-site training at their headquarters. This ensures that we keep pace with HMRC regulation and the special commissioners judgements handed down from recent IR35 cases.
We will provide a full and complete written report on their findings, along with suggested mechanisms, if required, to bolster IR35 defence. These can then be incorporated by the agency into the contract.
Our fee for a comprehensive IR35 Contract Review is £100 plus VAT, and gives peace of mind that your contract has been carefully checked by a qualified expert.