Ten Clauses That Should Take Your Contract Outside IR35

Nov. 12, 2010 - PRLog -- Commissioner’s Tips

We have put this together from various pointers from the Special Commissioners.

1.     Firstly, it is crucial that when the contract is for a fixed period of time, which they usually are, then it should be stated that this is just an estimate for the work to be done.

2.     The work to be done should be stated explicitly in the contract, and if you can, make it as unique as possible to your own skill set.

3.     Make it clear, in the contract, that you will be doing only the tasks stated in the contract.

4.     State in the contract that the hours worked per week may vary based on the work needed to complete the project.

5.     Make the payment terms and invoicing terms explicit in the contract, e.g. that your company must be paid X days after receipt of invoice. If you can, put a penalty clause in.

6.     The substitution clause appears to be of the utmost importance. Make sure that you have the right of substitution, i.e. the right to replace yourself with someone else, written into the contract. The Special Commissioner said that Case Law showed that where there is a right of substitution then you MUST be considered to be a small business rather than an employee. The Commissioner also said that the substitution clause in your contract must be taken at face value by the courts without evidence to the contrary.

7.     Give your client company the right of refusal for any substitute that you offer.

8.     Make sure that you register for VAT and that your contract states that it will be added. This will distinguish you from an employee, as they NEVER charge VAT on top of their salaries.

9.     Have it stated on your contract, that you will be responsible for all expenses for travel between your client’s different sites. This is a bit of a downer, but let’s hope that it is just bus fares or tube tickets, rather than flights to Sydney. I’m sure that you can do most of what you need to do over the phone or the internet anyway.

10.     If it is a job where you can use your own laptop rather than the company’s, at least part of the time, have it stated in your contract that you will be responsible for supplying your own PC.

Strong Indications

While it can never be said for definite how the Inland Revenue will view these changes, there have been strong indications by the Special Commissioner that these clauses in the contract will be points in favour of you being viewed as a small business rather than a disguised employee.

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IT Contractor -Umbrella company is a one-stop shop for IT contractors with news and advice e.g. on IR35 and the IT Contracts market. We have Umbrella Companies, IT Accountant, IT Contractor Mortgages, Pensions and Insurance and a Limited Company Set-up facility.