As you may all know, the taxman has not been so kind to the flexible workforce operating in the public sector. Now that the off-payroll rules have rolled out, the responsibility of deciding the employment status of the contractors falls on the end-clients, for which the latter ought to exercise “reasonable care”.
To make matters worse, the NHS had already informed its entire PSC workforce that they will fall inside the legislation even before the IR35 reforms got implemented. So it is not surprising that 85 per cent of PSCs are in the process of quitting the public sector if their client believes them to be inside IR35.
Having said that – if you are hell-bent on surviving (and thriving) as a public sector contractor, then here’s how you can beat HMRC in its own game:
1. Your way of working should be in your control.
You should never allow your client to dictate you on how you should carry out your work. First of all, you are a contractor and not an employee. Second of all, you are an expert at what you do and hence, your client should stop at mutually agreeing on the deliverables – that’s all. But if your client gives you instructions, then that is a big threat to your IR35 status.
2. Your company should be named as the sole provider of services.
If your contract states that you “personally” provide the services, then you are bound to get caught inside IR35. This is because the contract should be between your end client and your company. You are just one of the personnel in your company to do the job – always remember that.
3. Your contract should be project-based and not role-based.
If your contract is based on your role, then it puts you at a high “inside-IR35” risk. This is because employees in a company are assigned roles, and not temp workers. Contractors, in fact, are assigned tasks that they need to complete to get paid.
So don’t agree to work upon just anything for your end-client. Of course, if the contract is revised and those tasks are added to it, then it makes sense!
4. Avoid a long termination clause in your contract.
That’s because including such a clause can imply an obligation by your client to provide you with work – which will make you obliged to complete that work. This, in technical terms, is called “mutuality of obligation” or MOO, and puts a contractor at a major IR35 risk.
If your project is finished or cancelled, but you still are obliged to provide work even after giving notice (for whichever time period), then it throws light on the presence of MOO.
5. You shouldn’t specify the number of working hours in the contract
Generally speaking, you are a freelancer. You have a certain set of skills that you put to use to finish pre-defined tasks. That’s it. Now how you do it and within what timescale depend on you and not your end-client. Employees have a set number of working hours, not freelancers.
6. Stay away from employee-like activities.
These activities include attending meetings about employee matters, being named on the client’s company list, having an identity card that every employee has, etc. Please never forget that you are NOT an employee of the organization. You are just a contractor – functioning within contractual guidelines.
7. You are not entitled to an appraisal.
Pay hikes are something that employees get. If you accept a performance appraisal by your client, then the taxman will obviously come after you as it suggests you are “not in business on your account” but work for the end-client as its employee. If you want to increase your pay, renew the contract with adjusted T&Cs.
8. Don’t accept payments for sick days or holidays
Please make sure your contract is free from all such entitlements. Employees get paid leaves. They get paid sick days. Contractors don’t. If you are a freelancer and get paid for this, then HMRC will deem you to be inside IR35.
9. Start contracting with a former employer ONLY after a break
If you leave the end-client on Friday but resume fresh work from Monday, the HMRC will assume you are not a genuine contractor and that you took this move to save on taxes. Hence, take a break – you have earned it!
10. Get your IR35 status assessed ASAP
Do it so that you can sleep better at nights. As a public sector contractor, you must assure all parties that you are outside IR35. If the agency does not get any assurance from your client about this, then you will be entitled to pay tax at source – and that’s not cool!
Are you unsure about your IR35 status? Don’t waste time!
Visit our website today to book an appointment with a member of our staff.
You can even ring us at 0203 507 0087.