How is IR35 determined?
There are a series of factors and tests that are considered and can be used to determine the IR35 status of a worker these are listed below.
Supervision Direction and Control
Outside IR35: There is no supervision, direction or control from the client in how the contractor carries out the work.
Inside IR35: The contractor is supervised directly by the client and is given direction and control.
Right of Substitution
Outside IR35: The worker or PSC can provide a suitably qualified and skilled substitute to do the work in their place.
Inside IR35: The worker has to carry out the work personally and cannot provide a substitute.
Outside IR35: The worker has no holiday, sick or maternity pay benefits or any access to things such as free meals or staff events and parties.
Inside IR35: The worker has access to holiday, sick or maternity pay benefits and access to things such as free meals and staff events and parties.
Mutuality of Obligation
Outside IR35: The client has no obligation to offer work, or for the worker to accept any further work provided by the client.
Inside IR35: The client is obligated to provide further work, and the worker is obligated to accept it.
Outside IR35: The contract of employment has a clause where either party can give notice to bring the contract to an end, either immediately or at short notice.
Inside IR35: The client has a right to “dismiss” the worker. A dismissal carries employer/employee connotations.
Part and Parcel
Outside IR35: The worker is easily identifiable as being independent of the client and their full-time employees.
Inside IR35: The worker is indistinguishable from the client's other workers.
Outside IR35: The worker is risking their own money by buying their own equipment, paying for training, or reductions in their rate in the case of late or unsatisfactory work. They also provide for adequate business insurances to manage commercial risks.
Inside IR35: The client provides all of the financial support for assets needed to complete the job.
Length of Contract
Outside IR35: The ends after a set period of time or is project-based.
Inside IR35: The work is continuous with no set end date in place.
Intention of the Parties
Outside IR35: Both of the involved parties are aware that the arrangement is business-to-business.
Inside IR35: One or both parties involved are unaware that the arrangement is business-to-business or sees the arrangement as employer-employee.
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