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HMRC RISK BASED APPROACH

The rest of the IR35 section looks at some of the common factors in more detail to help you understand if you are IR35 compliant or not.

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IR35 DOES NOT APPLY IF...

  1. The subcontractor has some small contracts with other clients.
  2. The end client controlled what subcontractor did because the end client engaged the subcontractor to work on specific projects. So this factor is neutral.
  3. The end client had control over where subcontractor worked but this was because of the nature of subcontractor’s services. So this factor is neutral too.
  4. The subcontractor could choose where he/she worked.
  5. The end client did not control how the subcontractor worked
  6. The end client did not have the necessary level of control.
  7. The subcontractor did not get holiday pay, sick pay or other benefits.
  8. The subcontractor did not have to ask permission to take holidays. He would tell the end client his holiday plans.
  9. If the subcontractor did not take holidays during busy periods.
  10. The end client had little control over how he worked due to the skills in industry.
  11. The contracts laid down a standard hours each week but the hours which the subcontractors worked sometimes varied.
  12. Subcontractor gave the end client progress reports, especially if the project was overrunning.
  13. Subcontractors carried out all the work at the end client’s premises for security reason.
  14. The end client could send someone to do the subcontractor’s work.
  15. Even though the subcontractor has not sent a substitute, it is clear that there is no need for the subcontractor to provide a personal service. The end client will accept a substitute and the subcontractor has named two suitable substitutes.
  16. The subcontractor spends a lot of money providing and maintaining the equipment needed for the work. The subcontractor thus incurs financial risk.
  17. The subcontractor has no right to the kind of benefits an employee would receive from the end client.
  18. The subcontractor invoices for work carried out.
  19. Employees do not usually invoice for work carried out.
  20. The end client will not accept a substitute.
  21. Subcontractor’s personal service is required.
  22. The subcontractor incurs financial risk and can profit from sound management.
  23. The end client makes progress payments when subcontractor has completed stages of the fixed-price contract.
  24. The subcontractor has professional indemnity insurance and pays for his/her own training.​

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