The legislation hasn’t changed. Why do I need to do anything?
- HMRC pursues hundreds of IR35 cases a year and only wins about half of those that go to court. Your chances of being targeted are slim. But if targeted, your odds of losing aren’t so slim. A contractor lost an appeal early in 2020. It cost him almost £75K in back taxes and NI. If you join 34square, acquire our capabilities and use our services, you’ll substantially reduce your risk and elevate your peace of mind, for less than £200 per year.
The client becomes responsible. So why do I need 34square?
- Clients are risk averse and take legislative compliance seriously. They will only embrace outside IR35 service delivery if they can eliminate risk of non-compliance. Further, they need to sign up to the right of substitution in order to do so. 34square helps on both counts, by providing game-changing outside IR35 capabilities to contractors and by rendering your right of substitution an attractive benefit as opposed to an unwelcome risk.
Why can’t a few contractors collaborate in an informal substitution arrangement?
- You can. But HMRC is likely to challenge and find weaknesses in informal substitution arrangements. 34square provides you with a robust substitution capability that meets HMRC stipulations, at a significantly lower effort and cost than setting up your own arrangement. Further, 34square can help ensure your client unequivocally signs up to your right of substitution.
What if HMRC just abandons IR35?
- IR35 has been around since 2000 as a deterrent against large-scale abuse of limited company service provision. If IR35 were removed, it could seriously threaten Treasury income. Also, large organisations may decide to significantly reduce permanent employee headcount in favour of contractors due to financial treatment benefits. But tens of millions of us prefer the security, sense of belonging, progression opportunity, status and employee rights protection of permanent employment. Removal of IR35 would risk upsetting that balance in the UK economy. We believe abandonment is inconceivable.
Does membership of 34square make my outside IR35 status a certainty?
- HMRC may always dispute an outside IR35 arrangement based on its own interpretation of the rules and working practices. However, it is not in HMRC’s interest to pursue contractors that clearly meet the main determining criteria. As the Right of Substitution is one of the main determinants and an area HMRC always explores for weakness, by being a member of 34square and having a signed Right of Substitution Declaration with your client, you render yourself a considerably less viable target. If you have followed our guidance for working practices and other determinants, you are very unlikely to be pursued by HMRC. More importantly however, you would be in a very strong position to win a dispute. In 36 legal cases, 10 of the 19 contractors that won their appeals had strong right of substitution. More crucially, of the 17 that lost, ALL had right of substitution vulnerabilities. This infers HMRC must uncover right of substitution weaknesses in order to steer a determination towards other factors.
Why can’t I just join if I face a dispute?
- You can, but it won’t strengthen your case nearly as much. It will be obvious you only joined to get around the legislation. You won’t be able to demonstrate you had the capability in place prior to the dispute. You won’t have had a Right of Substitution Declaration in place with your client, linked directly to a robust capability to execute. We do also provide other benefits that are worth joining for on their own, including an additional opportunity for work and revenue. Further, the power of 34square is proportional to, even reliant upon the scale of our membership.
Why are you charging? It’s just a website? You can join LinkedIn for free?
- We have invested heavily for the long-term, researching, designing, building and launching a one-of-a-kind, highly sophisticated web-platform and charging only a nominal annual fee, in order to facilitate scale and resulting influence.
- Unlike many other network models, we do not make ‘you’ or your data the product. We purely focus on providing capabilities and services that strengthen your outside IR35 position.
Does membership of 34square put me in HMRC’s spotlight?
- If you are delivering services outside IR35 and truthfully completing your tax return, HMRC knows who you are, where you are and what you are doing already. In any case, your data provided to 34square is secured and cannot be accessed by outside parties. We also contend that membership of 34square is a way to demonstrate you have taken transparent and serious measures to support your outside IR35 status.
Do I have to have executed a substitution for any of this to make a difference?
- Categorically no. You just need to be about to tee off. In numerous past cases it has been concluded that the fact a substitution did not occur was of no relevance. HMRC cannot force you to take time off and lose income, nor can they force a client to replace you with someone else if you take a week off.
Do I still need legal expenses insurance if I am a member of 34square?
- This is personal choice. Being a member of 34square and following our guidelines can reduce the risk substantially. It does not eliminate it entirely. You should be aware insurance doesn’t prevent the life and work disruption of a dispute and court appearance.
- You may in any case want legal expenses insurance to cover you for other types of risk.
Why would HMRC dispute my status if I have a CEST assessment that puts me outside IR35?
- Many CEST questions are not binary. Answers can convey multiple realities. This is an area where HMRC has, intentionally or otherwise, room to manoeuvre in interpreting the truthfulness or validity of responses provided. But, if you are a member of 34square and have followed our guidance in terms of working practices and associated CEST responses, you arguably remove that room to manoeuvre.
Do I have to be paid on deliverables to be outside IR35 or is an hourly or daily rate okay?
- You can be paid an hourly or daily rate and still be outside IR35. Being paid on deliverables would strengthen your financial risk case. This is arguably only of benefit if you have a case that needs strengthening. If you have a solid right of substitution and follow our working practices guidelines, then CEST assessments logic and past case histories firmly point to the payment criteria and methodology being of no material consequence in concluding the engagement sits outside IR35. However, we do provide a Statement of Work generator, because what’s more important than the payment criteria is how your contribution is defined.
Doesn’t HMRC have a CEST get out clause? Answers must be proven to be true?
- That’s one interpretation. Another arguably fairer interpretation is that if HMRC state they will stand by results from data provided, that must be conditional on the data provided being true. HMRC can challenge your outside IR35 status irrespective of your CEST assessment outcome. However, if you have taken care to ensure you have appropriate working practices in place and answer CEST questions accordingly and truthfully, you are unlikely to face issues.
I’m told CEST isn’t fit for purpose and I should pay for a proper assessment?
- That’s personal choice. There are service providers that sell more comprehensive assessments. CEST is aligned with case law for most factors. The reality is, with our 34square model, you don’t need an assessment. We’ve done that for you and we prescribe the required working practices and conditions for the client and the contractor.
Is 34square endorsed by HMRC?
- It is unlikely HMRC would endorse a commercial service provider. This would obligate them to robustly assess every service provider and to fairly distribute their endorsements.
- In developing our portfolio of contractor capabilities and services, we consulted extensively with expert IR35 specialising lawyers, and conducted comprehensive research into available case law and other intelligence sources. We have also undertaken extensive testing on HMRC’s CEST platform to help build and substantiate our model.
If a CEST or other assessment puts me inside IR35, is that it? No way to reverse?
- If you and your client ensure working practices are aligned with an outside determination and repeat the assessment with appropriate responses and outside IR35 result, that assessment is no less valid than the first. As already stated, with our 34square model, you don’t need an assessment. We’ve done that for you and we prescribe the required working practices and conditions for the client and the contractor.