A Contact Review is a report that independent tax specialists such as Markel Tax provide to contractors giving an opinion on their IR35 status.
The review is used to understand the contractor’s position in terms of IR35 by reviewing the contractual terms and working arrangements and whether the opinion is that it is within or outside of IR35.
Determining IR35 status
A contract review service gives a breakdown of the key tests when determining IR35 status which are Personal Service, Control and Mutuality of Obligation. Clients, for example, will fill out a working practices questionnaire which will ask questions around the background of the limited company and how the contractor provides services on a day-to-day basis. This will then be reviewed in conjunction with the contract terms to see if the key tests are/are not present or if any changes are required.
It is important that the contract and the working arrangements mirror each other. A contract could have positive clauses which we would deem outside of IR35 but if the working arrangements are weak, then HMRC could question how genuine the contract is and consider this a ‘sham’ if the tests are not positively reflected in the working arrangements. Plus there is always the argument that the contract is merely a template that is sent out to many contractors especially if they are working through an agency so it is important that the actual working arrangements are reviewed.
If the working practices reflect more positively and the contract is weaker on the tests then we would recommend changes to particular wording, removal of clauses or additional wording to be added in line of what we would expect to see within a contract for services.
So do I need a contract review? The answer is yes if you want to show due diligence. Whilst HMRC are not bound by the opinion reached by a tax specialist, it certainly helps should you ever be subject to an enquiry and it is something we offer support on.
Call 0333 321 1403 for details