I think it's some of our strongest work and up intill now it's only been available to

our members at ukcontracting.co.uk . But from today it's free for everyone.

In this video I'll be looking at all aspects of IR35.

What it is, why it was introduced and most importantly how to stay outside of it.

I'll also look at each section of the Business Entity Test so you'll never be in the dark

about IR35 again.

So you've heard about IR35, but never really fully understood what it is,how it affects

you and how do you know if you're inside or outside of IR35?

This video is going to explore all the different aspects which make up IR35 and by the end

of this you should have a good idea if IR35 affects you or not.

but first What is IR35?

IR35 is HMRC's way of countering tax avoidance by people who disguise their employment.

In the past it was very common for people to finish their employed positions on a friday

and then return back on a Monday, to the same company doing the same job but as a contractor.

This means that the contractor can now take home more money if they are using a limited

company or partnership as a payment vehicle.

By using a limited company or partnership contractors are able to reduce the amount

of INcome tax and National insurance they paid.

As you'd expect HMRC aren't very happy about this and IR35 was introduced to try and stop

people from going out contracting when they should be employee's.

In 2012 the Business entity Test was introduced to try a define what risk level you are at

with IR35.

What this test set out to do is to paint a picture of the contractors company and help

clarify to the business owner what HMRC defines as a Proper company and what areas need to

be improved on, so not to be affected by IR35.

In the Next Video I'm going going to talk about the Right of Substitution how that affects

IR35

Substitution or the right of Substitutions means that the contractor has the right to

send an replacement with the same skill set to perform the contracted task.

If your contract states that replacements are able to be sent then your personal service

is not required and will almost always stop any IR35 challenge by HMRC.

It's important that you the contractor has the control over the Substitution, The client

shouldn't be able to refuse the replacement that is sent.

It's important that the contract states than any expense incurred in providing a substitute

it will be paid by the company not the client.

What HMRC likes to see is companies who need to bring in contractors are doing for the

skills not the person.

In the Next video i'm going to be talking about the issue of control

Contractor are brought in by companies because of their expertise in a particular field,

so very few contractors will be told how to perform their tasks.

You should try to make it clear in the contract that most of the decisions related to your

task are yours to make as long as they don't affect the final deliverable.

If you are unsure of issue of control think of the "what, when, where and how"

What work your client tells you to perform Where your client tells you to work

When your client tell you to work How you should you do the work

you should try to make sure you are in control of most of these aspects.

Next up is the mutuality of obligation

While Mutuality of Obligation or MOO as it's know, is one of the key tests in defining

your IR35 status very few contractor will be affect by it.

because usually after a contract has finished there is rarely any obligation by the client

to offer a new contract or for a contractor to feel obliged to accept a contract that

the client is offering.

While not many of you will be affected by MOO it's important to make sure that your

contract reflexes that you have the right to refuse further work from the client.

That you are able to pick and choose your project and it is never expected that you

just turn up to the client office to perform given tasks

Next up on our IR35 journey is Financial Risk

When an employee make a mistake generally they are not expected to reimburse the company

for the mistake or be expected to work for free to rectify the mistake.

This is not the case for a contractor.

If you make a mistake as a contractor you should be expect to fixed the problem at your

own cost, provide extra resources to get the project back on track or see your contract

terminated earlier and not been able to collect the full fee.

While this example is at the extreme level and I hope none of you will ever have to go

through a situation like it, there are many other ways to show financial risk if you get

a knock from HMRC.

Invoicing for work you've completed situations where you've had to negotiated

on price Receipts for stock or supplies

any bad debts you've had to suffer Project that didn't turn a profit

Projects that you made more profit than expect due to you completed the work early.

The final tip is to make sure that your contract has a fixed price and for the work and approximate

date of completion.

Next up is Part and Parcel

It normal for people to want to fit in when starting at a new company.

You want to be part of the team feel you below at the company but in the eyes of HMRC contractors

aren't able to do this.

While many judges consider part and parcel to be a ridiculous measure of employment status,

it important to avoid looking like a employee.

It can be very hard to distinguish the difference between contractor and a permanent employee

and the conveniences that companies offer to make you feel at home could be the very

things that bring you to the attention of HMRC inspectors.

Some things to avoid when contracting

Don't use transport provided by the company or carpool with employees

Don't accept the free lunch thats on offer or use the company canteen

Don't accept your christmas party invitation Make sure you sign in everyday instead of

using a pass Only use your own business card not the company

ones Make sure you aren't a first aider or fire

warden

In the next video I'll be talking about provision of equipment

The Provision of Equipment test can be very difficult for many contractors.

If you think of IT contractor they are going to be expected to use the client equipment

and network.

A oil contractor will use the tool that are on the rig and not bring their own.

Unfortunately this bring up a number of complications with IR35.

By using the client's equipment you are part and parcel of the business

There is no financial risk taken by the contractor in investing in kit

And you are being controlled by the client

It's recommended that contractors purchase equipment which are related to area of contracting

you may not have to use them but at least you can show you have them.

Another way is to develop some tools that will help you in your area of contracting.

In the next video I'll be talking about How HMRC defines your business status

HMRC likes to see you are in business on your own account (IBOYOA) now there are a number

of ways you can demonstrate this and most of them are related to marketing.

Which makes sense as real business market themselves to generate more clients.

So its important to have the following to show HMRC that you mean business

have a professional looking website get business cards, letterheads and other

stationery made Create and use social networks with your company

name Have listing in local and niche based directories

Try to get some mentions is local press or trade press.

Do work which is outside of your main contract.

Host open days, networking events or sponsor them

Have a business phone number

You may be reluctant to have all of these due to the cost involved but it pales in comparison

to the expense of being caught by IR35.

Thank you for watching , We hope you gained some valuable knowledge which will help you

in your contracting career.

If you have any questions about this video or if you are having any other issues, then

please put them in the comments box or tweet me @gregDickson and I make I respond to them

in a video or blog post or email as soon as possible.

If you think others will benefit from this video then please do share it with them.

Finally don't forget to subscribe, we have lots of things planed over the next few months

and we'd love for you to be part of it.