Setting up LTD and Caught By IR35

[oraclesmith]

One reason why the agents might not like substitution clauses for example, is that they/the client interviewed one person for the contract and they don't want someone else turning up. Arguably, this may not necessarily be a bad thing because it's a B2B contract and it's down to the limited company contractor to ensure the job is done as per the contract. But I can understand some agents nervousness at substitution. However, if the contractor limited has to pay more tax, then this should be reflected in the rate as they will have to make up the potential loss due to additional tax.

Has anyone known this to happen ? ie. a small limited winning a contract on the strength of the Director's ability and then placing an equally skilled subbie or a fellow Director in the contract from day one or at a later date.

[Charl1e brown74]

To be fair, SJD do understand IR35 requirements very well, but this looks like a case where professional advisers and negotiators like Bauer and Cotterell would have helped. Use them next time.

Meanwhile, if you have a moderately unfettered right of substitution OR some discretion over where and how to do the work OR no right to money if there's no work and vice versa, any half decent representative will put you outside IR35 if challenged. So learn the rules and stop paying tax you don't have to.

Do not believe agencies - most of them don't even understand their own marketplace, much less the finer details of contract law. If they are using a contract that is intended to put you inside IR35, it's becuase their contract with the end-client has promised no risk of you claiming employment rights and this is how they think they will achieve it (but they've never heard od Dacas/Muscat so they're wrong!).

And finally - next time, the contract is between your limited company (or your umbrella) and the agency. You personally do not need to appear on any contractual statements: that is why you are inside IR35 for this contract, it has been made into a contract of service (i.e. you personally are doing the work) not a contract for services. Big mistake, don't do it again.

Malvolio you are correct, the agent and other staff are not clued up on details like contract law and even there own industry!! How frustrating!

The agency are called brightred and are based in Gerard’s cross, they are an independent (so not part of a large group) which was one of the reasons I went with them. You live and learn. The next step is to get educated ASAP on the dos and don’ts of contract negotiation so as I am ready for the next lot of recruitment consultants.

Going to contact SJD initially and see what advice they provide on accounting options. As many people say on this board the advice is only worth what you pay for it. Thanks for the advice.

[expat]

One reason why the agents might not like substitution clauses for example, is that they/the client interviewed one person for the contract and they don't want someone else turning up.

That's the usual reality. The client doesn't want a B2B contract to get the work done, they interview you and they want you.

Instead of trying to pretend otherwise, why not just do it? Bill the rate for your work, pay the income tax on your income. Then stop worrying about the tax you wish wasn't taxed, and get on with your life.

If you insist on thinking that you shouldn't have to pay NICs on all your income, do as one poster suggested: bill accordingly. The agency can have an inside-IR35 contract if they want, but it costs more than an outside-IR35 contract.

[Ardesco]

One reason why the agents might not like substitution clauses for example, is that they/the client interviewed one person for the contract and they don't want someone else turning up.

You could always get the to write in that you are only allowed to substitute in somebody who works for your LTD Co. That way you can show that you don't have any employee's and that should keep everybody happy.

I don;t know if this is feasible or how it would affect your IR35 status though so it's probably something to ask a pro about

[oraclesmith]

Personally I'd slip in the clause but only use it if I need to - eg. if I was sick or had an accident or some other disaster. My argument is that I'd need to sub-contract if I substituted and that would mean I'd be an agency customer and therefore will need to pay full client price (ie. with agency fee added on) for a contractor with equivalent skills. Which in turn would mean I'd lose maybe £50 to £100 a day. The fact that this is possible means I would satisfy another part of IR35 which is about the possibility of making a loss on a contract.

Also, I have my own contract for services which I got drafted by a business lawyer at considerable cost to my company.

I was wondering if anyone had been brave enough to try the substitution of another contractor mid contract, allowing them to get on with the next one ?

[malvolio]

Also, I have my own contract for services which I got drafted by a business lawyer at considerable cost to my company.

I was wondering if anyone had been brave enough to try the substitution of another contractor mid contract, allowing them to get on with the next one ?

a) Should have joined the PCG then: they do them for free...

b) Yes, I've seen it done. Easy for non-management roles, where the client is only really interested in getting the work done, not who's doing it.

[autodial]

To be fair, SJD do understand IR35 requirements very well, but this looks like a case where professional advisers and negotiators like Bauer and Cotterell would have helped. Use them next time.

Meanwhile, if you have a moderately unfettered right of substitution OR some discretion over where and how to do the work OR no right to money if there's no work and vice versa, any half decent representative will put you outside IR35 if challenged. So learn the rules and stop paying tax you don't have to.

Do not believe agencies - most of them don't even understand their own marketplace, much less the finer details of contract law. If they are using a contract that is intended to put you inside IR35, it's becuase their contract with the end-client has promised no risk of you claiming employment rights and this is how they think they will achieve it (but they've never heard od Dacas/Muscat so they're wrong!).

And finally - next time, the contract is between your limited company (or your umbrella) and the agency. You personally do not need to appear on any contractual statements: that is why you are inside IR35 for this contract, it has been made into a contract of service (i.e. you personally are doing the work) not a contract for services. Big mistake, don't do it again.

Iagree, I use Bauer & Cotrell everytime I get a contrct as they always check out the IR35 pitfalls, and they tell you of any worrysome commercial areas and on most occasions have negotiated comercial clauses for me as well

[TheMonkey]

I have a stuffed monkey called Nigel (I am 100% serious) that substitutes for me to cover the contractual obligations, i.e it lives in the office and can talk for hours to agents about rubbish.

I have a contract (finished one) somewhere that states Nigel Monkey as a written substitute.

Clients are usually ok about Nigel substituting as he works for monkey nuts.

Now I've given that away, all the agents will read it and I'll have to get another stuffed substitute.

If the HMRC get me, I'll say Nigel left the country after it turned out that he got the wrong banana boat to England.