The main questions you need answered are, what is IR56 and how does it effect you? Well you can find all the answers below.
IR56 was issued by HMRC in order to clarify how IR35 should be applied. It takes the form of a questionnaire, which you must complete, concerning the contract and working practices you have with a particular client. Once completed you have a clear indication of whether your contract is “Deemed Employed” or “Self-Employed”. This status is fundamental when understanding how IR35 should be applied.
Here are some typical questions from the IR56 test:
Have you agreed exclusivity with one client?
Do you have the right to send a substitute or to hire others to do the work?
Do you have the right of control in how, when and where the work is completed?
On their own, the results of the questionnaire are not sufficient to fully determine your status, which can be open to a fair degree of personal interpretation. This is especially true when there is a monetary incentive attached to the outcome.
In order to give a definitive answer to your status, your actual employment contract or contract for services would also need to be professionally assessed. Known as an “IR35 review”, the fact that it can cost up to £200 per contract usually deters most contractors from going down the “Self-Employed” route.
Remember: Crystal Umbrella uses PAYE tax methodologies to process all income; therefore this particular piece of legislation is of no relevance to any contractor who chooses to use us as their payment solution