Contracts and Flexibility

9 April 2023 · Filed in Contractor

I am developing a new programme to guide IT professionals leaping into Contracting.

Contracts

As a UK contractor, you will likely be involved in a number of contracts. It is important to understand the importance of contracts, statement of works and IR35, and how they can affect your business.

What is a contract?

A contract is an agreement between two or more parties. It sets out the rights and obligations of each party.

Why are contracts important?

Contracts are important because they help to protect both parties in the event of a dispute. It sets out the terms and conditions of the agreement, such as the work that you will do, the payment that you will receive, and the dispute resolution process.

Contracts are important because they provide a framework for your work with your clients. They help to ensure that everyone is on the same page and that there are no misunderstandings.

Are all contracts the same?

Whilst most contracts have the same inclusions such as the terms of the contract, the payment schedule, and the dispute resolution process, they can vary in the detail depending on the current business climate and who drew up the paperwork. That said, get everything in writing. When you enter into a contract, make sure that everything is in writing.

Read the contract carefully before signing. Don’t just sign a contract without reading it carefully. Make sure that you understand everything in the contract and that you are comfortable with the terms.

What is IR35?

IR35 is a tax regulation that was introduced in 2000. It aims to prevent contractors from using intermediaries to avoid paying taxes. If you are deemed to be inside IR35, you will be treated as an employee for tax purposes, which means you will pay more tax.

How does IR35 work?

IR35 is a complex rule, but there are a number of factors that the tax authorities will consider when determining whether you are inside or outside IR35. These factors include:

• The level of control you have over your work

• The amount of financial risk you take

• The level of integration you have with the client’s business

How can I avoid IR35?

There are a number of things you can do to avoid IR35, such as:

• Using a personal service company. A personal service company is a limited company that you can set up to hold your contracting business. This can help to protect you from IR35 if you are found to be an employee of your client.

• Your contract should be compliant with IR35. This means that it should not contain any clauses that could be seen as evidence that you are an employee.

• Setting your own hours and controlling your work. As a consultant you are expected to provide a service or end solution.

• Not being integrated with the client’s business

How can I help?

I can help you to understand the contract and to make sure that you are not being taken advantage of.

We cover all these in the course in two live sessions. We also provide support and materials to ensure your contract is easy to understand, with things to watch for, worksheets and professional assistance.

By understanding the importance of contracts and IR35, you can protect your business and are taxed fairly.

Come ask me and the community questions. You can find me on Slack and LinkedIn.

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