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New contract - opening day curve ball

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    New contract - opening day curve ball

    Last week I started a new contract with a new client, and after having a thorough review via a 3rd party the contract was water-tight with respect to IR35.

    The contract between my limited and the client specifies the projects the consultant (me) will be assigned to. During the interview the situation was explained to me that there would be a roughly 80 / 20 split or thereabouts between the two projects. No problem I thought.

    On the first day I find out that the client has changed the goal posts and now the secondary project is number 3 in a list of 4 they want me to work on at some point. And they wanted to initially dictate a 50/50 split between my time on the major project and a selection of the 4 secondary projects.

    Curve ball.

    Now I'm not particularly happy about this obviously, but from my point of view looking strictly at the working practices and avoiding being controlled by the client, something needs to change. The worst case is a tax bill in the future my wife and I can't pay.

    So the question is how to shore this up. I've very diplomatically said let's get our feet under the table on the first project, find out what it looks like, and then take a step back to see how other projects can be woven in - and we have agreed this will happen in early June. So until then my limited will be working on the primary project only, and I believe the contract is sound.

    Encouragingly, since I made this recommendation (as the consultant), the client has started downplaying any idea of a 50/50 split in time.

    So the question is how to shore this situation up.

    In my mind, if the client wants to reshape the projects configuration, this should be done at a contract level so as to not jeopardise the IR35 status and risk leaving me (as director of my limited) with an unexpected tax surprise in the future. That's simply not a risk worth taking, and I'm sure that can be explained in a diplomatic and matter of fact way, business to business.

    This is my first draft of ideas to resolve. Any thoughts?

    #2
    Originally posted by ForBajor View Post
    Last week I started a new contract with a new client, and after having a thorough review via a 3rd party the contract was water-tight with respect to IR35.

    The contract between my limited and the client specifies the projects the consultant (me) will be assigned to. During the interview the situation was explained to me that there would be a roughly 80 / 20 split or thereabouts between the two projects. No problem I thought.

    On the first day I find out that the client has changed the goal posts and now the secondary project is number 3 in a list of 4 they want me to work on at some point. And they wanted to initially dictate a 50/50 split between my time on the major project and a selection of the 4 secondary projects.

    Curve ball.

    Now I'm not particularly happy about this obviously, but from my point of view looking strictly at the working practices and avoiding being controlled by the client, something needs to change. The worst case is a tax bill in the future my wife and I can't pay.

    So the question is how to shore this up. I've very diplomatically said let's get our feet under the table on the first project, find out what it looks like, and then take a step back to see how other projects can be woven in - and we have agreed this will happen in early June. So until then my limited will be working on the primary project only, and I believe the contract is sound.

    Encouragingly, since I made this recommendation (as the consultant), the client has started downplaying any idea of a 50/50 split in time.

    So the question is how to shore this situation up.

    In my mind, if the client wants to reshape the projects configuration, this should be done at a contract level so as to not jeopardise the IR35 status and risk leaving me (as director of my limited) with an unexpected tax surprise in the future. That's simply not a risk worth taking, and I'm sure that can be explained in a diplomatic and matter of fact way, business to business.

    This is my first draft of ideas to resolve. Any thoughts?
    I'd agree. If the projects are specified in the schedule, then ask the client to contact the agent to issue a revised schedule for the additional projects. On the plus side, it sounds like there's plenty of work for your business!

    Comment


      #3
      ....

      Originally posted by ForBajor View Post
      Last week I started a new contract with a new client, and after having a thorough review via a 3rd party the contract was water-tight with respect to IR35.

      The contract between my limited and the client specifies the projects the consultant (me) will be assigned to. During the interview the situation was explained to me that there would be a roughly 80 / 20 split or thereabouts between the two projects. No problem I thought.

      On the first day I find out that the client has changed the goal posts and now the secondary project is number 3 in a list of 4 they want me to work on at some point. And they wanted to initially dictate a 50/50 split between my time on the major project and a selection of the 4 secondary projects.

      Curve ball.

      Now I'm not particularly happy about this obviously, but from my point of view looking strictly at the working practices and avoiding being controlled by the client, something needs to change. The worst case is a tax bill in the future my wife and I can't pay.

      So the question is how to shore this up. I've very diplomatically said let's get our feet under the table on the first project, find out what it looks like, and then take a step back to see how other projects can be woven in - and we have agreed this will happen in early June. So until then my limited will be working on the primary project only, and I believe the contract is sound.

      Encouragingly, since I made this recommendation (as the consultant), the client has started downplaying any idea of a 50/50 split in time.

      So the question is how to shore this situation up.

      In my mind, if the client wants to reshape the projects configuration, this should be done at a contract level so as to not jeopardise the IR35 status and risk leaving me (as director of my limited) with an unexpected tax surprise in the future. That's simply not a risk worth taking, and I'm sure that can be explained in a diplomatic and matter of fact way, business to business.

      This is my first draft of ideas to resolve. Any thoughts?
      Document all conversations. You have already demonstrated that the client is under your control as per the above. Make sure your input continues to be received and acted upon. Carry on and keep invoicing.

      You have to remember also that there are 3 pillars to it; D & C, MoO and substitution. If you can demonstrate that you are compliant with one, you are not IR35 caught for that contract. In the above, you have only considered the one and then it is not clear. If you are managing those projects, your concerns are less important than if you are developing specific pieces of work on individual projects at the whim of the client.
      Last edited by tractor; 10 May 2015, 18:40.

      Comment


        #4
        Originally posted by tractor View Post
        Document all conversations. You have already demonstrated that the client is under your control as per the above. Make sure your input continues to be received and acted upon. Carry on and keep invoicing.

        You have to remember also that there are 3 pillars to it; D & C, MoO and substitution. If you can demonstrate that you are compliant with one, you are not IR35 caught for that contract. In the above, you have only considered the one and then it is not clear. If you are managing those projects, your concerns are less important than if you are developing specific pieces of work on individual projects at the whim of the client.
        Document all conversations - has to be done I think. At the very least something to the client stating the situation and why the contract needs to change with the project configuration.

        With regard to substitution - I have this clause in my contract, and there is no MoO either. QDoS checked this out and the contract is a pass.

        So I'm seeing step one as a 1:1 chat with my assigned contact about how we go about changing the projects configuration. That is, via a discussion in the first instance and then having this reflected in an updated contract. This is essential to avoid future issues with HMRC which my limited cannot risk, and is purely a business issue. The updated contract would need to be signed off before any work can commence on out-of-scope projects.

        Simples.

        Comment


          #5
          Originally posted by mudskipper View Post
          I'd agree. If the projects are specified in the schedule, then ask the client to contact the agent to issue a revised schedule for the additional projects. On the plus side, it sounds like there's plenty of work for your business!
          Thanks for pointing out the positive bit in all of this - that there is lots of PM work out there!

          There's no agent in this instance, but QDoS dealt with shoring up the contract first time round, so I'll be carefully carrying out negotiations over the contract change.

          Comment


            #6
            Hmmm. Fair enough if the contract states this then you need to get it changed.

            Chances are though client has had a rethink and this is what they want now? Don't expect clients to be organised do you?

            All for making them do it properly but if you kick off too much and moan that the original contract said X and now they want you to do Y, then you might not have to worry about IR35 at all. They'll get someone else in who will do Y without any hassle.

            Wrong maybe but thats the way clients think.
            Rhyddid i lofnod psychocandy!!!!

            Comment

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