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.
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 so-called disguised 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.
It is designed to support your written contract and should address the key status elements – such as your right to provide a substitute, a non-mutuality of obligation and a lack of control over you by the client
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.
What if your client or contact refuses to sign the letter?
Ideally, you should write the letter on your own limited company stationery and have it signed by someone who is directly involved with your provision of services to the client.
Some clients may be reluctant to sign a letter, particularly for large organisations. In this scenario, it may be worth pointing out that it is not a legally binding document but a guide for information purposes.
In the event of an HMRC IR35 enquiry, your client would be obliged to provide the same details to the tax inspectors.
Ultimately, if your client refuses to sign the document, there is little you can do, as pushing your case might affect your reputation and chances of future work.
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