Finance Bill 2017: substitution

[breaktwister]

It seems that the right to substitution should lead to an automatic "outside" IR35 determination according to the relevant law:

S61M(1)(a)
Sections 61N to 61R apply where—
(a) an individual (“the worker”) personally performs, or is under
an obligation personally to perform, services for another
person (“the client”),

This is not new law and is why the substitution clause has been so vital in determining IR35 status. Most PSC company contracts allow for substitution of workers (or they should do if you have been claiming to work outside IR35 to date). However, it seems HMRC conveniently ignore substitution where it suits them in their new guidance. I would very much like to see the ESS tool questions on substitution. I recall seeing a workflow example where HMRC claimed that a temporary secretary could not "practically" substitute even if her contract allowed and they went on to ignore it completely and moved onto other tests! Can anyone link me to this example as I have saved so many links but cannot find that particular one?

Creasy case is also relevant here: Creasey case confirms the value of an unfettered right to substitute :: Contractor UK

[northernladuk]

It seems that the right to substitution should lead to an automatic "outside" IR35 determination according to the relevant law:

S61M(1)(a)
Sections 61N to 61R apply where—
(a) an individual (“the worker”) personally performs, or is under
an obligation personally to perform, services for another
person (“the client”),

This is not new law and is why the substitution clause has been so vital in determining IR35 status. Most PSC company contracts allow for substitution of workers (or they should do if you have been claiming to work outside IR35 to date). However, it seems HMRC conveniently ignore substitution where it suits them in their new guidance. I would very much like to see the ESS tool questions on substitution. I recall seeing a workflow example where HMRC claimed that a temporary secretary could not "practically" substitute even if her contract allowed and they went on to ignore it completely and moved onto other tests! Can anyone link me to this example as I have saved so many links but cannot find that particular one?

Creasy case is also relevant here: Creasey case confirms the value of an unfettered right to substitute :: Contractor UK

Be very clear when you are reading 'Right to' and 'actually provided'. There have been a number of situations where the RoS is considered a sham as it is unlikely to be accepted even if it's in the contract.

IT contractors warned on IR35 substitution clauses :: Contractor UK

IR35 and the Right of Substitution | Contract Eye

There is another article where Kate herself says RoS is a minor defense compared to the other 'pillars.

This is affects all contracts and RoS. Not just PS ones BTW

[LondonManc]

If you can get a day's substitution authorised by your PS between now and the end of your gig, you're in the clear from the retrospective tax grab angle and for the foreseeable if you remain in the same project.

The actuality is that you won't be able to exercise your right of substitution, which is HMRC's gambit; that is, if they interview your client about you being allowed to substitute, what would your client, if questioned without your knowledge, say about your right to substitution?

[northernladuk]

If you can get a day's substitution authorised by your PS between now and the end of your gig, you're in the clear from the retrospective tax grab angle and for the foreseeable if you remain in the same project.

The actuality is that you won't be able to exercise your right of substitution, which is HMRC's gambit; that is, if they interview your client about you being allowed to substitute, what would your client, if questioned without your knowledge, say about your right to substitution?

Don't ask them though!!! If you ask them and they say no then your contract is a sham and your insurances probably won't cover you. If you don't know you could possibly argue it later.

[northernladuk]

I recall seeing a workflow example where HMRC claimed that a temporary secretary could not "practically" substitute even if her contract allowed and they went on to ignore it completely and moved onto other tests! Can anyone link me to this example as I have saved so many links but cannot find that particular one?

Well the good news is the OP has given up trying to be a Yasmin. Bad news is he's trying to make himself look like a temporary secretary now.

[breaktwister]

Bad news is he's trying to make himself look like a temporary secretary now.

Providing secretariat services on a business-to-business basis thank you very much

[breaktwister]

The actuality is that you won't be able to exercise your right of substitution, which is HMRC's gambit; that is, if they interview your client about you being allowed to substitute, what would your client, if questioned without your knowledge, say about your right to substitution?

This is my point, the law can only have reference to the rights conferred by the contract, even if they are rarely or never invoked. Some (most?) clients may be unaware that they have signed a contract that allows for substitution, in which case that is their problem, it doesn't mean that the right doesn't exist.

It is not that easy to escape contractual clauses by claiming that one was unaware of them.

But yes, it has potential to create huge problems if end-clients are using the ESS tool and answering questions when they are not fully aware of the terms of the contract.

[northernladuk]

Providing secretariat services on a business-to-business basis thank you very much

Judging from your last thread I'd doubt that.

[northernladuk]

This is my point, the law can only have reference to the rights conferred by the contract, even if they are rarely or never invoked. Some (most?) clients may be unaware that they have signed a contract that allows for substitution, in which case that is their problem, it doesn't mean that the right doesn't exist.

It is not that easy to escape contractual clauses by claiming that one was unaware of them.

The client doesn't care what is in your contract. It's between you and the agent. The agent will have an upper contract between them and the client. If that hasn't got RoS in you are stuffed. It's not their problem. It's got nothing to do with them. It's yours because you have a sham clause which will have them looking at the rest of your contract like a set of hungry vultures.

[LondonManc]

This is my point, the law can only have reference to the rights conferred by the contract, even if they are rarely or never invoked. Some (most?) clients may be unaware that they have signed a contract that allows for substitution, in which case that is their problem, it doesn't mean that the right doesn't exist.

It is not that easy to escape contractual clauses by claiming that one was unaware of them.

But yes, it has potential to create huge problems if end-clients are using the ESS tool and answering questions when they are not fully aware of the terms of the contract.

No it's not - if you actually read up on IR35, you'll find that working practices trump the contract. Hence having an outside IR35 contract is pointless if your behaviours and those of the client are different.