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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.
Before you send it off for review, I'd suggest you check some things yourself, just to see if there's anything that you obviously need to change.
1. Will your company be financially responsible for failure? [Yes = Good]
2. Will your sound management be profitable for your company, in performing the contract? [Yes = Good]
3. Is your company permitted to send alternative personnel? [Yes = Good]
4. Does your company bear the risk of bad debts? [Yes = Good]
5. Does your contract say "Contract for services" instead of "Service contract"? [Yes = Good]
6. Are you entitled to sick or holiday pay? [No = Good]
7. Are you in a "master and servant" relationship with your client? [No = Good]
8. Do you and your client have mutuality of obligations? [no = Good]
If you are a UK freelancer and all of the above check out in your case, then you might stand a good chance of staying outside IR35. But a word of warning about contracts: It's not just about WHAT is written, but also the WAY it is written. When reviewing contracts, IR35 experts look very closely at wording and phrasing. They know that poor wording can create a chink in your armour that the tax authorities can exploit.
So, step one in surviving IR35 is to get all contracts reviewed by an IR35 expert before signing. If the expert advises that the contract or part of it should be changed, get it changed before signing.
Article Source: http://www.articlemotron.com
Originally called the Intermediaries Legislation, but better known as IR35, this law was introduced towards the start of 2000. The purpose of it is to prevent tax evasion through the use of personal service companies. This is done, not by identifying those doing so, but simply by taxing such companies (which do have a legitimate purpose) the same as individuals are taxed.
This page has been brought to you by the companies Home Loans Direct and Small Business & IR35 Contractor Accountants Antony J. Holdsworth & Co.
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