Alongside an IR35 compliant contract, and matching working practices, a document confirming the true working arrangement between contractor and client is an important tool in demonstrating self-employment.
IR35 and the importance of working practices
Since IR35 became law in 2000, a great deal of time has been devoted to the importance of IR35 compliant contracts which demonstrate that the subject is self-employed rather than merely a disguised employee.
Not only should the lower tier contract (contractor – agent) match the terms of the upper-tier contract (agent – client), but the contractor’s working practices must also demonstrate that he/she works in a manner of a self-employed individual, rather than a traditional employee.
With this in mind, employment status specialists recommend drawing up a confirmation of arrangements letter in which a client confirms how the contractor will work and act during the course of his/her contract.
Seb Maley from leading IR35 specialists Qdos Contractor explains further:
Confirmation of Arrangements
“The true facts of an engagement are absolutely key in the case of an IR35 enquiry. HMRC will give short shrift to any compliant written contract if it is apparent that the working practices do not match. Unfortunately, actually clarifying the facts when you are under enquiry can prove to be very difficult.
“HMRC will send numerous leading questions to your end client, which often results in them inadvertently causing serious problems. Add to that the fact that your contract may have long ended and the people you actually worked with are no longer there: you may end up with someone you’ve never met answering very specific and potentially damaging IR35-related questions.
“The confirmation of arrangements goes some way to negating HMRC’s need to pursue the end client. It will clarify all of the key points and, if signed by a responsible individual at the client, will have a huge impact on your prospects of success.”
Free Confirmation of Arrangements template
You can download a free confirmation template, as well as sample contracts, from the Qdos website.