IT contractors trying to understand IR35 better should note that they risk penalties by HMRC if their clients provide them with a hire car for their business travel just like they do for their permanent employees.
HMRC would view this as an employee-type benefit and hence, it will assume that rather than being a contractor, the individual is a permanent part of the client’s organisation. This is because the car hire would be at the expense of the client. As a result, this could turn into a major issue if the IT contractor is subject to an IR35 enquiry.
While it is alright if an IT contractor uses the client’s hire car once in a while, it would not help the contractor’s case. It will not demonstrate in totality that the IT contractor’s limited company is a genuine and independent company. A genuine IT service provider is expected to arrange as well as pay for their own business travel and for any equipment that the provider deems necessary for rendering their services.
IR35 is a complicated piece of legislation. It is important that IT contractors first consider all the facts and also undertake key tests to maintain their IR35 status. Contractors should be looking to ensure that if they have put through an IR35 enquiry, the outcome would be in their favour. It is imperative that any negative issues, as far as possible, should be avoided.
As per the guidelines issued for Travel and Subsistence, if a contractor is operating outside IR35, they can claim relief for their work-related travel expenses. This would indicate to HMRC that the contractor’s public limited entity is a genuine business. It would be best to inform clients who provide hire cars that using this benefit would have a negative impact on the contractor’s self-employed status and will get them into trouble should HMRC begin an IR35 enquiry.