The following badges of trade are a non-exhaustive
checklist of some of the factors HM Revenue & Customs would
use in assessing whether income from a particular contract is
subject to the IR35 tax rules:
| Badges
of Trade |
Indicative of Self
Employment/Contract for Service (IR35 does not apply) |
Indicative of Employment/Contract of Service
(IR35 does apply) |
| Control |
You have the right to decide how and when
a job is done.
Leading test cases: ECR Consulting Ltd, Castle Construction (Chesterfield) Ltd. |
Close directional supervision by your
client (master – servant relationship). Staff rules and regulations. Client can
dismiss you.
Leading test cases: Autoclenz Ltd, Andrews. |
| Substitution |
You have the right to decide by whom a job is done.
Leading test cases: ECR Consulting Ltd, Community Dental Centres Ltd, MBF Design Services Ltd, Express and Echo Publications Ltd. |
Single named worker only, or non matching contracts either side of agency, providing a personal service
Leading test case: Dragonfly Consultancy Ltd. |
Basis of remuneration |
Remunerated on a project basis, or at a
fixed price. |
Remunerated on a time basis. |
Provision of equipment |
You supply large or expensive equipment,
and may work from a dedicated area of your own premises. |
Provision of only small or no equipment.
Work at client’s premises |
Trading structure |
Trade with more than one client at a time,
or work on short successive assignments with different clients.
Leading test case: MBF Design Services Ltd. |
Long term assignments with the same client. |
Financial risk |
A loss can be suffered. All rejected work
to be corrected at your own cost. Penalty clauses. The opportunity
exists to make a larger profit from sound management.
Leading test case: J and C Windows. |
No financial exposure. All rejected work
to be corrected at your client’s cost. |
Business organisation |
Own premises, letterheads, domain, website, training, other employees,
insurance etc. Quoting for jobs in advance. Advertising |
None. |
Terms of engagement |
Contracts and actual working practices which are consistent with beneficial badeges of trade. |
Contracts which do not record the above beneficial badges of trade, no contracts
at all, or actual work practises which differ from those recorded (sham).
Leading test case: Autoclenz Ltd.
|
Employee rights |
None. |
Typical employee benefits and statutory protection (eg paid holidays,
sick pay, etc). |
Part and parcel of the organisation |
Appear and behave different to employees. Do not attend staff parties, training days, etc.
Leading test cases: Novasoft Ltd,. |
Appear and behave the same as employees.
Leading test cases: Dragonfly Consultancy Ltd, Future Online Ltd. |
Mutuality of obligations and intentions |
No obligation to offer and accept work over
a period of time.
Leading test cases: ECR Consulting Ltd, Larkstar Data Ltd. |
Mutual committment to offer and accept work over a period
of time.
Leading test cases: Airfix Footwear Ltd, Synaptek Ltd. |
The overall picture of employment status would ultimately
be determined by a court of law based on the "balance of
probabilities"; not based on "beyond reasonable doubt",
which is the yardstick by which most Tax Inspectors wrongly arrive
at an opinion. In deciding IR35 status, a tribunal would 'paint a picture from the accumulation of detail'. This is why the
detail is important and this is an area where we can offer guidance.
