Being in business on your own account: top tips
Suggestions at the very latest meeting of the IR35 Forum that ‘being in business on your own account’ is to be incorporated into CEST will be welcome by many contractors.
But what constitutes ‘being in business on your own account,’ and how do you go about demonstrating it? Christian Faires, managing director of contractor accountancy firm Intouch Accounting explains, with 5 keys steps to consider.
Well, beyond the basics of contractual wording, the more you can show that you are indeed ‘in business on your own account’, rather than a ‘disguised employee’, the greater the chance that you fall outside the scope of IR35.
By adopting certain working characteristics, you are more likely to be able to prove you are a bonafide trading business entity, helping to keep you on the favourable side of IR35.
And an added benefit is that you will look more professional and business-like to potential clients and agencies too. They will want to see these ‘badges of business’ – and so will you if an HMRC inspector calls. Here’s five steps to help you start collecting them if you haven’t already:
1. Create a professional business identity
It’s relatively cheap and easy these days to create your own business website, logo, business cards and letterhead along with company email address.
These elements represent your business identity -- they look professional and prove that you’re taking your business seriously. Advertising your business’s services also helps prove self-employment.
2. Get multiple income streams flowing
Having multiple clients is a strong pointer towards being in business on your own account (although each assignment will be judged separately for IR35 purposes), as is having income from non-contracting sources, even if the income generated is relatively small. You should aim to regularly tender for contract work, or apply for contract opportunities, rather than have multiple renewals for the same client.
3. Set up a dedicated office and source equipment
Establishing a dedicated home office space, or renting a commercial premise, that contains equipment that you use specifically for your contracting business is an important signpost to being in business on your own account.
Even when on-site, you should use your own equipment rather than that supplied by your client unless there is a good reason not to. Contractors who can show they have bought their own computer and office equipment, software licences and business insurances, and who have also kitted out an office, even if it’s at home, will be demonstrating they are running a business.
4. Get professionals on board
Do you have business liability and professional indemnity insurance in place? Doing so indicates that you are taking responsibility for your own business. Engaging legal advice and/or using a specialist contractor accountant does this too, and should also give you the benefit of professional IR35 advice and reviews.
5. Invest in training
Keeping your expertise up-to-date or learning new business skills and arranging relevant training is good business practice and another demonstration to HMRC that you are in business on your own account.
The fact that the Revenue has described CEST potentially not dealing with cases where an individual has a range of engagements suggestive of them being in business on their own account as a “concern,” in turn suggests that you might want to draw on the above five sooner, rather than later.