How to Get the Attention of IR35 Away from Your Business?
The increase in IR35 cases and investigations made by the HMRC has caused a huge amount of concerns to several independent contractors. Penalties can reach from up to 70% of unpaid taxes which can take a huge hit off their earnings. Getting in an IR35 contracting however, is something that can be completely avoided with careful planning and preparation especially for the authentic or genuine independent contractors. Let us look at some tips to help you get less attention from the HMRC.
The Difference Between Employee and Contractors
It is important for an independent contractor to know how to differentiate themselves from a traditional employee to help them with their IR35 case. Someone who goes to work at the same offices of the same firm on a regular basis is often classified as an employee. IR35 contractors on the other hand, don’t usually report at the office of the company but instead provide their service for a given fee. These individuals are the ones that will be doing their own decision making and work on their own time and at their own expense. Companies who are hiring independent contractors will need to reevaluate their work practices and then make sure that the contract aligns with those working practices which helps avoid problems with the HMRC.
Independent Contractors Initiative
It should be noted that the company is not the only ones responsible in keeping the attention of IR35 from their business. Independent contractors should also be taking the initiative in making sure that they are not classified as an employee. Little things such as bringing your own equipment at work will have a huge impact in the future as this goes a long way in helping keep IR35 at bay. If you do decide to bring your equipment, make sure that you are getting some proof that they are used in the project. You can do this by sending emails to the company that you are making good use with the equipment that you have brought.
A number of contractors may be tempted to report to the company office however, many find it best to just work at home or at a different location. It is better safe and sorry. Of course, you will need to ask permission from your project management first to let you do some work at home.
Last but definitely not the least is for independent contractors to keep all the proof that they have paid for their own expenses. This is not limited to receipts but also requests for materials needed from the client. It is important to note that the HMRC will go as far back as 6 years if it decides to review your status with regards to IR35 contracting. For that matter, make sure that you document your expenses as often as possible. Many find it best to hire an accountant to help them with their paperwork which in turn helps save them a fair amount of time as a result.