Right to substitution vs. Bum-on-seat

[meanttobeworking]

It strikes me that as freelancers, we do a lot to avoid being classed as a bum-on-seat resource - instead bringing expertise and special skills not present (to one degree or another) at the end client.

This seems to be logically incompatible with the expectation that, at any given time, I have the right to send in a different person to take over.

Substitution is a much more understandable proposition if you're providing a bum-on-seat service, but harder to apply when you're not (which is what we are aspiring to).

I find myself trying to balance providing a valuable service that my client wants to continue using without getting them to be so dependent on my personal service that substitution becomes a contract checkbox but not palatable in reality.

When I establish myself as a key member of a project team, I feel pleased that I've "done a good sales job" and won some good business for my company, but worry I'm reducing my substitution defence. And when I sense I'm being treated more like an expendable bum-on-seat, I worry about contract longevity but feel more like the possibility of a substitution is more of a reality.

I'm just interested in how others balance this?

For context, I tend to provide broad consultancy services across technical, requirements analysis and management of digital projects to both private sector end clients and digital agencies.

I'm also a natural worrier, over-analyser and hate ambiguity - so obviously IR35 is right up my street.

[WordIsBond]

If you are saying that to prove you are a business under IR35 rules, you have to act contrary to good business, yeah, you're right.

IR35 tends to view a long term relationship as a sign that you are an employee rather than a business. Normal business practice would be to build long term stable client relationships, repeat customers, all that.

Provide something hard to get -- that's good business. IR35 says provide something that you can bring in substitutes. More of the same -- don't act like a business or HMRC will decide you aren't one.

Notice periods -- this is another one. In a normal world, I'd say it is to my advantage to have a contract between my business and another business that they can't just walk away from without penalties. Don't most businesses want that, so that they can plan, and they don't have to spend all their time and money on sales because they've got an established contract? The longer and more ironclad the contract is, the happier the businessman. But IR35 says that's MoO and proves you aren't a business.

My balance on these things -- I don't care if I'm irreplaceable. I'd rather be so indispensable that they keep wanting me back. And I love contract renewals. My only concession to the stupidity is to use short notice terms in my contracts.

But I'm militant on SDC. I control when, where, and how the jobs are done. I decide what I'm going to do and what I'm going to delegate to an employee or subcontractor (or, in rare cases, one of my client's employees).

And I take financial risk. I pay staff. I buy computers. I pay for insurance. I pay for travel to clients on occasion, including foreign travel. I have exchange rate risk.

In other words, I make sure I'm ironclad on two areas and don't worry too much about the other areas.

[meanttobeworking]

Right to substitution vs. Bum-on-seat

[QUOTE=WordIsBond;2392231]If you are saying that to prove you are a business under IR35 rules, you have to act contrary to good business, yeah, you're right.[QUOTE]

That's a perfect summary of the problem

[WordIsBond]

That's a perfect summary of the problem

It's why any business-sensible government would marginally increase dividend tax a little more on one man bands to virtually negate the tax imbalance and thus tax-motivated incorporation, and then eliminate IR35 entirely.

You don't have to completely eliminate the tax imbalance, the other costs and hassles of running a corporation are enough disincentive that it doesn't have to be entirely balanced, and in fact, probably shouldn't be.

[LondonManc]

My take on the intention of the substitution clause is to show that you're a business rather than an individual simply avoiding tax. That said, would a consultancy with 10 employees be able to provide a suitable substitute in all circumstances? Arguably not.

While the spirit of the legislation is well-intended, it's anything from logical in practice, which does make it consistent with the rest of the garbage rules that surround the freelance market.

[radish2008]

To be frank I fear all of these conversations are likely to be irrelevant in a year or so.

IR35 is a state of fear. It keeps people worried and for a few it puts them off. They go back to being perm because it scares them.

The government is quietly destroying contracting through the back door - by reducing tax benefits, increasing direct taxation and decreasing the margin that contractors 'make' through increased rates vs permies. The incentive to contract becomes less each year as we earn less but still have the issues of pensions, sick pay and business costs etc etc.

They have been doing this for a decade and IPSE is now plainly part of the problem, not any kind of solution I can recognise.

So the energy and knowledge and sometime outright IR35 fanaticism displayed on this site is all wasted. In 5 years contracting as we know it won't exist.

[LondonManc]

To be frank I fear all of these conversations are likely to be irrelevant in a year or so.

IR35 is a state of fear. It keeps people worried and for a few it puts them off. They go back to being perm because it scares them.

The government is quietly destroying contracting through the back door - by reducing tax benefits, increasing direct taxation and decreasing the margin that contractors 'make' through increased rates vs permies. The incentive to contract becomes less each year as we earn less but still have the issues of pensions, sick pay and business costs etc etc.

They have been doing this for a decade and IPSE is now plainly part of the problem, not any kind of solution I can recognise.

So the energy and knowledge and sometime outright IR35 fanaticism displayed on this site is all wasted. In 5 years contracting as we know it won't exist.

Is it wasted if contracting is left to the contractors rather than the bum-on-seaters?

The bum-on-seaters shouldn't be pushed into IR35 - the employers should be engaging them in FTCs, so that they stump up the employer NICs as HMRC want.

[radish2008]

Is it wasted if contracting is left to the contractors rather than the bum-on-seaters?

The bum-on-seaters shouldn't be pushed into IR35 - the employers should be engaging them in FTCs, so that they stump up the employer NICs as HMRC want.

I don't think IR35 will exist.

I don't think contracting will exist as it does now if there is much less advantage - I think the government has always wanted all contractors to move into perm positions. That's what it will drive towards and implement.

[LondonManc]

I don't think IR35 will exist.

I don't think contracting will exist as it does now if there is much less advantage - I think the government has always wanted all contractors to move into perm positions. That's what it will drive towards and implement.

In reality, they know it cannot happen completely. That will leave the contract market to the contractors who aren't FTC candidates. The biggest problem with their plan is the expenses - you'll end up having to take local contracts if you cannot afford to live away from home.

What is worse is that there will be proportionately more sales drones to contracts and people asking for two references and other tedious garbage.

[malvolio]

I don't think IR35 will exist.

I don't think contracting will exist as it does now if there is much less advantage - I think the government has always wanted all contractors to move into perm positions. That's what it will drive towards and implement.

Do you really understand why IR35 exists in its current form and why it won't be repealed?