As a contractor in the UK, finding the right work contract can be a challenging task, especially if you are new to contracting and have little previous experience.
A wide range of factors come into finding the perfect role, not least the potential cost and complexities that come with the IR35 tax regulations.
However, before we look at this, what are some of the other considerations that may come into selecting the right work contract for you?
Pay
A key consideration when choosing a contract is how much it pays. Some contracts naturally pay more, especially if certain skills are in high demand.
While it may be tempting to just go with the highest-paid contract available at any given time, it is important that you understand what is expected of you and that other factors don’t make the role difficult or untenable. Money isn’t everything.
Flexibility
There is a natural level of flexibility for contractors, but some businesses may have expectations about where you work and the days that you need to be working. It is best to clarify this so that it fits in with your requirements.
Length
Every contract will have varying lengths. Some will be clear and give a definite beginning and end date, others may be less certain.
If you have plans to take time out from contracting during particular parts of the year, which isn’t uncommon, you should make sure that these arrangements don’t clash with your plans.
People
It is worthwhile knowing what kind of people and business you will be working for. Before agreeing to a contract, it helps to speak with the people you will be supporting and understand how the business operates.
A little due diligence can prevent you from being stuck in a contract that is dull, difficult or involves working with challenging characters. It never hurts to speak with agencies or other contractors that have previously worked for the business to get a measure of the company.
IR35 – What to consider
IR35 is tax legislation designed to deal with a form of tax avoidance known as disguised remuneration.
This is where individuals attempt to avoid paying the full rate of Income Tax and National Insurance Contributions (NICS), by providing their services through an intermediary, such as a Personal Service Company (PSC).
Under the previous IR35 rules, the intermediary was required to determine the status of the person providing the service. However, this person was typically the sole director of the PSC, i.e. the intermediary itself.
Since 6 April 2021, the rules have changed and it is now the responsibility of the businesses engaging the services of these individuals, who are responsible for determining whether they are inside or outside of IR35.
These changes to IR35 legislation represent one of the most significant changes to contractors’ relationships with medium and large-sized businesses that are affected.
Some contracts you come across may be advertised as inside or outside of IR35. This is because in some cases the business engaging your services will have already determined whether the role available is within the rules.
Regardless of how a contract is advertised, a business must carry out a status determination exercise for each contract agreed with an agency or worker, even where you have worked with them previously.
The Status Determination Statement (SDS) should clearly outline the decision on whether the off-payroll working rules apply and the reasons for the decision, which must be provided to you.
When considering the status of an employee they must consider:
- What are the worker’s responsibilities?
- Who controls the individual (i.e. when, where and how do they work)?
- How they are paid?
- Are they directly in receipt of any benefit or expense?
Evidence suggests that some large employers in the public sector have taken a blanket approach to include all contractors under the rules to avoid a penalty or reputational damage.
However, employers should take a cautious approach when applying the rules and take time to identify each person’s status on an individual basis to prevent legal action from being taken against them.
Speak to your clients
Status determinations or advertised roles are rarely set in stone and so there may be some room to reassess a contract if you are interested in taking a position within a business.
As mentioned, many employers have been cautious and have taken the decision to apply blanket IR35 determinations.
If you can make a reasoned argument to them on why your contract is not within the rules, many employers may be willing to consider your position.
Seek professional advice
If you are still unsure about your IR35 status or if you need help finding the right work contract, it’s a good idea to seek professional advice.
We here at Cogent Accountants or a recommended specialist contractor advisor can help you navigate the IR35 rules and find the right work contract for you.