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Avoiding IR35 Problems
13th January 2012
Are you an employee or a supplier? Does it matter? It definitely does in respect of tax planning and many small business owners are at risk of getting it wrong.
In order for an arrangement with your customer to be considered one of employment (meaning earnings via PAYE and other issues), two conditions needs to apply:
- the contract must stipulate the individual as the provider of the service and not by someone else, specifically a subsitute.
- the client must have control over how the work is performed by the provider.
In order to keep your arrangements with your clients on the right side of legislation your contract needs to include a substitution clause and ideally, we'd like to see you able to demonstrate you had actually used it. This means identifying one or more people capable of also performing the role and ensuring they become involved.
A recent court case involving HMRC and Talentcore Ltd found this to be the single most important aspect in determining the status of the provider, outweighing the element of control.
Call us on 01235 868888 to discuss your own particular needs regarding substitution.
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