IR35 Contract

As most people are now aware a Contract can be written, oral or implied. The Contract is rightly considered to be very important as it sets out the rights and obligations agreed between the Contractor and the Client. Another point to consider is that certain industries have certain working practices that would not be put into a contract but would be well known in the industry and any Contractor would be expected to know them without recourse to a Contract. An example would be the Motor industry, which has certain holidays, for example "Industrial Fortnight" in the summer and a lengthy Christmas break. Although these holidays may not be detailed in any contract, the Contractor would be expected to know these holidays and know that the Client premises would be closed at these times.

In the Employment Tribunal case Maurice v Betterware UK Ltd. Mrs. Maurice stated that although she had a properly written contract, the Contract (similar to a Contract for Services, i.e. self-employment) it didn't actually reflect her working practices. Mrs. Maurice argued that she was an employee and was claiming unfair dismissal. This was challenged by Betterware who argued she was self-employed. As yet the case has not been heard before the Employment Tribunal but it certainly shows that disputes can happen between Contractors and Clients over Contracts. This could give the Inland Revenue the impression the contract is not a live contract and doesn't reflect the true working practices.

Before the Revenue will accept the Contract, they will challenge clauses in the Contract to see if they have happened or whether they have been included to make the Contract appear to be one of self-employment. The common one is to consider if a substitution clause has ever been used or whether it would be impractical for the Client to accept a substitute. (There is a later section on Substitution). All these are pointers, which will help either the Revenue or the Client/Contractor "build up a picture" of the working practices to make a decision.

Article kindly supplied by Ray McMahon


Editor's note: You may be interested in our IR35 calculator

Useful links: IR35 substitution  IR35 control  IR35 mutuality of obligation