Surviving IR35 - Step 1 - By: Antony..,

The Intermediaries Legislation, more usually known as IR35, was first adopted towards the start of 2000. When it was introduced, it was supposed to stop workers from avoiding paying tax, and enforce the mandatory National Insurance Contribution (NIC). It would do this by forcing certain companies to pay the same tax as their employees.

Obviously, people have not liked this, especially freelancers who frequently take considerable risks in their business. Almost all freelancers are self employed, and so can easily be caught out by this new tax. A contract that is well phrased and clear will be fine, but the smallest mistake in word choice can be enough to sink you.

The easiest way to solve this is to get an expert to review the contract. There are plenty of experienced lawyers who would be willing to look it over, and the average price is just 120. Considering how important it is that you get this right, and what you will be charged if you get it wrong, it's well worth the price.

So let's go over some of the key factors that you need to consider. Here are a few questions that may help you determine if your contract is likely to pass.

1. If you fail, does your company bear the financial risk of it? [Yes = Good]

2. Will your sound management be profitable for your company, in performing the contract? [Yes = Good]

3. Does your company have the right to send alternative personnel? [Yes = Good]

4. Is your company responsible for any bad debts? [Yes = Good]

5. Does your contract read "Contract for services" as opposed to "Service contract"? [Yes = Good]

6. Are you eligible for holiday or sick pay? [No = Good]

7. Is the relationship between you and your client one of "master and servant"? [No = Good]

8. Do you have mutuality of obligations with your client? [No = Good]

For a UK freelancer, if all of the above seems to be in order, then you have a good chance of being unaffected by an IR35 investigation. However, you need to consider not only what is written in your contract, but also how it is written. Even if all of the contents of your contract are in order, a badly phrased paragraph could still easily sink you.

So, the first step in making sure you are completely in the clear with regards to IR35 is to contact an expert reviewer. Get them to take a look at your contract, and sound out anything that might trip you up. Just be sure you get thsi done before you put pen to paper and actually sign it.

This page has been brought to you by the companies Home Loans Direct, and the Small Business & IR35 Contractor Accountants Antony J. Holdsworth & Co.

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