Are you genuinely self employed? IR35 is the short description for tax legislation designed to ensure that individuals who work through a limited company are entitled to the benefit associated with self employed status.

In effect HM Revenue & Customs IR35 test asks the question; should you as an individual be treated as an employee of the Client for whom you carry out work?

To put it more simply, if you had been in the shoes of Crest Plus Contracting Limited, would you then be treated by HM Revenue & Customs as the client's employee? Alternatively, would HM Revenue & Customs, in all the circumstances, have to accept that you were an independent business supplying a service to the Client?

Interpretation of the circumstances can be difficult, but here are some pointers which suggest that IR35 will not apply to you:-

Length of the Project

You know that you are not going to be working at one location for more than a few months.

Number of Projects

Your Projects are generally short term so you expect to be working for different businesses at different locations in a given year.

The way in which you do the work is not closely controlled

Generally you are given a task and are expected to "get on with it". Equally, you would not accept instructions to do work which has not been defined in your Project Confirmation. Essentially, the Client has the right to tell you and or the contractor what to do but does not have the right to tell you how to do it.

No benefits associated with the work place

You do not receive from the Client such benefits as pension contributions, holiday pay, healthcare, company uniform, staff car parking or an invitation to the Christmas party, i.e. benefits that actual employees of the client do generally receive.

Financial Risk

You have an element of financial risk, i.e. you have to supply your own tools; your income varies e.g. with the number of hours worked. You may have the risk of being sued for failing to perform work properly, although Crest Plus Contracting Limited, of course, has cover for this risk by insuring for Professional Indemnity, Employers Liability, Public Liability and Products Liability. You may have the risk of delay; for example you are laid off as a result of inclement weather.

The above insurance package has been arranged on behalf of Crest Plus Contracting Limited by Village Insurance Services Limited which is an Appointed Representative of Fitzgerald Reid Dickinson Limited trading as FRD Risk Solutions ("FRD"). FRD is Authorised and Regulated by the Financial Services Authority.

Continuity

When your Project finishes, you do not assume that the Client must provide you with further work. You know that you will have to go out and look for further work, either by contacting an Agency or otherwise.

There are plenty of other relevant factors, but these will indicate the nature of the test. It is also important that you understand that no one circumstance or even group of circumstances is conclusive. It is the totality of the picture that counts.

We believe that the vast majority of our subcontractors are on short term Projects and have little security of income. It is therefore fair and reasonable that there should be some compensation for the risk that is entailed in short term Projects. In order to try and ensure that you receive this compensation, we do the following:-

1. We encourage you to work with Crest Plus Contracting Limited on a variety of different projects.
2. We ask you to complete the Work Status Questionnaire from time to time so that we can advise you on your IR35 status.
3. In the unlikely event that HM Revenue & Customs commences an enquiry into your status then, providing you are at that time and have remained an active Subcontractor of Crest Plus Contracting Limited, we will assist you with that enquiry.
4. We closely monitor changes in tax legislation and conduct Crest Plus Contracting Limited in accordance with that legislation.
5. We try to ensure, wherever possible, that the terms of the agreements reached between Crest Plus Contracting Limited and the Agencies or Clients support your status as an independent self employed subcontractor working on short term Projects outside the reach of IR35.

You need to understand that working through Crest Plus Contracting Limited does not guarantee that you are correctly taxed. Only maintaining the correct status matters. If HM Revenue & Customs can prove that you should be treated as an employee of the Client for tax purposes then the additional tax liability will ultimately have to be met by you.

As you can see, this is a complex subject - not everyone's cup of tea.

If you would like to know more about IR35, we suggest you obtain a copy of HM Revenue & Customs booklet, IR56.