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IR35: What are the key factors that determine when a contractor is inside or outside IR35?

Posted-on February 2021 By Amy Bates

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​As IR35 is being implemented on 6th April 2021, not everyone is aware of the key factors that determine whether a contractor is inside or outside IR35.

The first place we would recommend that you go to see if your contractor is inside or outside IR35 is the HMRC online employment status tool (CEST). It will get you to answer a series of questions and then at the end, based on you answers will tell you if inside or outside of IR35.

The main thing to think about is if they receiving the same rights as that of a permanent employment. For example, sick pay, holiday entitlement or benefits. If they do then nine times out of ten, they would be deemed to be inside IR35.

The main factors that HMRC use to see if inside or Outside are:

Substitution:

Can you send someone else to complete the work in the place of another person? If the answer is yes, then they are not providing a personal service and they are not an employee. ​

Control:

Are you controlling the persons workload and how they carry it out? If you are then they are likely to be inside IR35.

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Mutuality of obligation (MOO):

This is only one indicator of employment and does not determine employment status. Each case would be assessed on its own merits which leaves it in the air as to weather inside or outside IR35. Contractors are best having their contracts reviewed by a expert to make sure they are failing into the correct category.

Risk:

If the contractor can make a profit or a loss so a financial risk to them then this would properly be outside IR35.