IR35: What is Control?

There are several factors to be considered when determining the IR35 status of an assignment but arguably, the most important factor to be considered is control.

Perhaps one of the most publicised cases relating to IR35 is that of Lorraine Kelly. One of the reasons the courts found in her favour, was that she was able to demonstrate that ITV did not exercise enough control over her work, to be consistent with an employment relationship.  She argued that she “carried out her work with autonomy and ITV Breakfast Ltd did not have direct control over the way she provided her services.” This ultimately contributed to her tribunal success and a whopping £1.2 million tax liability saving.

What is Control in IR35?

To be considered outside of IR35, the level of control exercised by the end hirer over the contractor should fall short of what would be expected in an employment relationship. There should be a degree of autonomy as to how the contractor can carry out the work.  In a genuine business to business relationship you would not expect the end hirer to exercise the same level of control as they would over an employee.

It is important that the contractor can demonstrate independence from the end hirer and maintain control over the following:

  • How: Does the contractor have control over how the work is completed? If the client can specify how the contactor must complete the work, this would indicate an employment relationship and point to a position inside IR35.
  • When: Does the contractor have control over when the work is completed? All contracts can be reasonably expected to include deadlines or milestones, however if you have specified working hours in the contract, this indicates an element of control.
  • Where: Who controls where the work is completed? If the contractor must work on site at the end hirers office, this may be indicative of an employment relationship. Ideally there should be flexibility as to where the work is completed, is there any reason why the contractor can’t complete the work from their own office?
  • What: If the end hirer can control what the contractor works on, this is an indicator of employment. To maintain a position outside IR35, the contractor should be able to turn down work that falls out of scope of the agreed project. They should not be seen as an additional resource.

Whilst it is inevitable that the end hirer will offer some guidelines relating to the work being completed, in order to be outside IR35 it is important that the degree of control falls short of what would be expected in an employment relationship.

Additional points to consider

Here is a list of additional points to consider, amongst these we have already mentioned:

  • Is the contractor subject to performance reviews?
  • Will the end hirer provide the equipment?
  • Are the working hours/days clearly defined?
  • Will the contractor need to obtain authorisation before taking time off?
  • Will there be an exclusivity clause in the contract?
  • Will the contractor be ‘managed’ or ‘managing’?

If the contractor is subject to a high degree of control it is likely that they will be regarded as a disguised employee, as they would be treated in the same way as any other employee resource. In order to support a position outside IR35 a contractor should be able to demonstrate autonomy and control over how they complete the assignment. To achieve this, both the contract and crucially the working practices should be closely inspected to ensure this is the case.

The conclusive way of determining the IR35 status of an assignment, is to have an IR35 specialist review the contract and working practices.

Here at Parasol we can help with that, along with providing recommendations on where improvements can be made within the contract. For more information, request a callback and a member of the team will be in touch to discuss how we can help you.

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