ADVANTAGE OF SEPARATE IR35 CONTRACTS

Separate Contracts for Each Project - If HMRC enquire into an IR35 status determination, they review the relevant contracts, and these need to accurately reflect the actual working practices. Since 2021, this enquiry will typically involve your end client directly if they were responsible for your status determination — but the same principles below apply regardless of who made the original assessment.

HMRC will check with the end client and if they discover that the actual working practices do not match what is in the contract, and that the worker was treated like an employee, the chance of successfully defending the determination will be reduced.

Where you are engaged on a number of different projects, your paperwork must detail all of the projects for the period of your engagement. The contract should state the start and end dates for each project and fees charged. This will help you to demonstrate that there is no mutuality of obligation between you and your client.

Without mutuality of obligation a contract (if there is a contract) cannot be a contract of service (employment). With mutuality of obligation a contract may or may not be a contract of service depending on a number of other factors.

A one off contract for 1/2 day and a long-term agreement to work contain the essential element of mutuality of obligation which makes it possible that the contracts are contracts of service.

If there is mutuality of obligation and control then whether the contract is one of service depends on a number of factors such as whether the worker can increase his profit by working efficiently for example. All other things being equal a number of contracts in succession with the same client are less likely to be contracts of service than one long contract for the same period.

This is a live and evolving area of law. The Supreme Court's 2024 ruling in Professional Game Match Officials Ltd v HMRC specifically addressed how mutuality of obligation should be interpreted, and confirmed that even short-term, ad hoc engagements can meet the mutuality test once work is actually being performed — a stricter reading than many contractors previously assumed. This makes documenting separate, clearly-bounded projects, as described above, more important than ever, even though mutuality alone is no longer enough to determine status on its own; it must be weighed alongside control and the wider picture of the working relationship.

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■ IR35 Employment Status ■ Advantage of Separate Contracts for Each Project ■ IR35 Case Law ■

■ Engaging as Employee or Contractor ■ IR35 Status Review ■ Contractor Expenses Guide ■

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