Contractors’ Questions: Is using the client’s equipment an IR35-risk?

Contractor’s Question : A lot of companies insist that contractors use the client’s equipment and not connect the contractor’s own equipment to the client network due to security risks. What's HMRCs view on this and equipment usage, in terms of implications under IR35?

Expert’s Answer: Certainly the use of a contractor’s own equipment is often cited as an indication (albeit a lesser one) that he/she will be outside IR35, and HMRC may consider those not using their own equipment to be unlikely to be operating their own business.

So client-provided equipment may be indicative of an employment relationship, and any contractual clause stipulating that the end-client will supply equipment is likely to be damaging in an IR35 assessment. The only obvious ‘get-out’ to this this would be where the equipment is highly specialist.

But like everything IR35-related, the area is ‘grey’ and there are always likely to be exceptions. When determining IR35 status, a holistic approach is taken by looking at written terms and actual working practices. There may be very good reasons why your own equipment cannot be used, with security being one of the main reasons for client’s equipment needing to be used. This is particularly common among IT contractors whose work often integrates into client systems.

Unfortunately, HMRC’s CEST tool cannot cope with the grey nature of the provision of equipment. So be very careful if it is relied upon, because the tool could very easily give an incorrect result -- answer ‘no’ to providing your own equipment and the online assessment cannot then assess the very legitimate reasons as to why this might be the case.

The expert was Helen Christopher, operations director of contractor accountancy firm Orange Genie.

Wednesday 20th Feb 2019
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Written by Helen Christopher

Chartered accountant Helen Christopher is a former head of finance & accounting and a former chief operating officer, who has worked for 28 years in corporate roles. Helen qualified as an accountant in 1995 with Price Waterhouse (now PwC) – the year she became a member of the ICAEW, and seven years prior to her becoming an FCA. Also a local magistrate for the Department of Justice, Helen specialises in tax, accounting and HMRC advice for small companies and their owners. 
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