How Will Covid-19 Affect IR35 Determinations?

14th October, 2020
By 14. October 2020COVID-19, IR35, News
How Will Covid19 Affect IR35 Determinations

With Covid-19 measures altering the way many people work, there could be a need to review contracts and working practices in relation to the key status tests. Here we take a closer look at how Covid-19 measures could impact IR35 status tests and the likely extent of their influence.

Supervision, Direction and Control

One of the main changes brought about by Covid-19 is the switch to home working. One of the definitions of being in business on your own account is the ability to retain a certain level of independence over how you carry out your work. This relates to the key status test known as Supervision, Direction and Control.

The key here is the extent to which contractors are being treated differently to employees. For remote working to be a strong indicator supporting an Outside IR35 Status Determination, the contractor should be free to determine where they work from and ideally demonstrate use of this practice regardless of any other factors such as Covid-19.

In the majority of cases, homeworking because of Covid-19 also applies to employees, so contractors can’t differentiate themselves by this factor alone. Although contractors do appear to have more options open to them in terms of where they work from, they ultimately still fall under the control of the end hirer who can direct the contractors to recommence working from their site or office at their own discretion.

It can be used to strengthen the case of contractors who have shown that their work can be done at home with less supervision and direction. It’s worth the client reviewing the contract wording, for example, clients can rewrite contracts without specifying ‘site location’ or saying the contractor has ‘flexibility to choose’.

Part and Parcel

As part of their Covid-19 policies, many businesses have asked their workers to complete risk assessments asking, for example, how they travel to and from work. Under usual circumstances such information would be irrelevant for contractors. As a genuine contractor working outside the scope of IR35, you should, in theory, have the right to decide where you provide your services from, your method of travel and how often you visit the client’s premises.

Due to the sensitive nature of Covid-19 and the impact an outbreak could have on a business, it’s unlikely that completing a risk-assessment would affect your IR35 status. However, it’s worth checking to see if there are specific risk-assessments for employees that differ from ones for contractors. Showing that you were treated as a visitor or a contractor rather than an employee should further cement your outside IR35 status.

Mutuality of Obligation

One of the main principles of contracting is that there is no obligation for the client to provide work or for the contractor to accept it. This applies both during the contract – which can be terminated without notice on either side – and after its completion with regards to subsequent work.

Pre-Covid, MoO was more likely to be simply presumed, particularly where a contractor had undertaken work for the same business for some time. However, during the Covid pandemic, many contractors have been stood down at short notice. There has been a reduction in hours that contractors are working, and therefore billing for. This is good evidence that these contracts are not guaranteed, and are therefore not subject to MoO.

In summary, it’s unlikely that the changes in working practices brought about by Covid-19 would be enough, in themselves, to change a contractor’s IR35 status. However, collectively, or in addition to other existing factors, they could be good news for borderline cases when it comes to strengthening an outside IR35 status. It’s also the case that as the pandemic continues, it could bring about more significant changes to a contractor’s working practices that could indeed affect IR35 status.

This content has been supplied by IR35 Guru

Contractors and businesses are now advised to use the remaining time until April 2021 to prepare for the changes ahead. If you’re looking for more information on IR35 our free comprehensive guide gives you a clear overview of the legislation to date. ContractingWISE has a range of options to help you keep your contracting career on track. To talk to a member of our team, call: 0203 642 8679

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