Contractors' Questions: Is my agent 'IR35-friendly'?

Contractor's Question: I've just had my contract reviewed and been told that it does fall within IR35. But my recruitment agent says that everyone working via the agency for the same client company is using the same contract and there is no scope for negotiating the terms for IR35 purposes.

The agency's recommendation seems to be that it is OK to keep working as if I am outside IR35 'as long as you keep your head down.' They imply the majority of contractors are taking this approach, as they all have the same contracts. Shall I do the same?

Expert's Answer: If I had a pound for every time I heard that an agent said their contract is "IR35 friendly" or "everyone is on the same contract and no negotiation is possible" I would be retired years ago!

In the last five years I have come across maybe three agencies where this comment – our contract is IR35 friendly - proves correct. However that said, in all cases the view has either changed over time (with the advent of other legislation e.g. the Conduct Regulations) and often it depends upon who the end client is, who the contractor is and how much the client wants the contractor.

As much as many agencies and clients want to have a one-size-fits-all approach this is not usually workable. IR35 is of course concerned with the reality of the terms and conditions between the individual supplied and the end client which is why it is necessary to review the written contractual terms AND the working practices.

This means that you could have the most 'IR35-friendly' contract in existence but if your working practices do not reflect this then you would be considered to be inside IR35.

At Bauer & Cottrell we would not enter into contractual negotiations unless the working practices support such a view. Being told to work outside IR35 and 'keep your head down' is not an option for anyone where IR35 is a potential issue for many reasons.

What of the duty and responsibility to establish the correct charge or the fact that HMRC will not apply penalties where a contractor has taken action to establish the IR35 position? How exactly do you "keep your head down"? The short answer here is that the written contract should reflect the terms and conditions and if there is conflict between the two then negotiation is appropriate.

Answer provided by Kate Cottrell, founder of Bauer & Cottrell, an IT contractor advisory specialising in IR35.