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IR35 - Gainsborough Recruitment's View

Please note: The views expressed in this document in no way represent legal or financial advice. We would strongly advise contractors to seek such advice from an appropriate accredited source.

For the revenues' latest documentation on IR35, please follow the "other websites" links from our Recruitment section on

The contractors' exposure to IR35 is defined primarily by the client/contractor relationship, which should be accurately reflected in the contractor/agency contract. Where they differ, the revenue will use the evidence of the relationship.

For normal contracts (4 weeks or more continuous work) the recent IR35 revisions consider such engagements to meet the conditions of employment, unless the contractor can demonstrate self-employment characteristics. To summarise these well documented characteristics:

Control - Who decides the work is to be done, where, how and when, and with what.
Financial Risk - Who takes the financial risk.
Contract Term - More accurately, client/contractor relationship duration.
Substitution - Can a contractor provide a substitute for himself.
Peers - Does the contractor sit next to permanent employees doing the same job.
Payment - Regular payments against timesheets point to employment.

It is probable that the revenue will have the power to demand a copy of the corresponding agency/client contract, when reviewing a contractor/agency contract for IR35 compliance. As these issues relate to personal tax, the revenue will also be able to revisit a contract up to 6 years in the past to determine if the correct level of taxation has been applied. It is therefore vital that both contracts accurately reflect the true client/contractor relationship.

In conclusion, there is no "easy fix" for avoiding the extra taxation under IR35. Ask anyone (such as an agency who offers IR35-proof contracts) to pay any additional tax claimed in the future should the contract prove to not be IR35-proof, and you will see what we mean! As ever, following professional advice from an appropriate source will always triumph over the "quick-fix, should be ok" approach championed by some agencies and many consultants.

Gainsborough Recruitment values highly the relationships we have developed with our contractors, and we fully realise the impact of this legislation on your careers. Consequently, we are happy to discuss and implement restructured trading terms where they have a benefit to the contractor, and are acceptable or transparent to the client.