"Contracted Regular Employee" status being pushed on me - IR35 implications?

[Proeliator2001]

I work in the engineering industry and the US have recently changed their ITAR rules (covers export of technology which could be used for military purposes) which impacts how information is allowed to be shared to sub-contractors. Because of this, the client I work for are in a bit of a bind - they cannot share (at least not easily) info with contractors and to get around this they want to move a large proportion of the contractors over to what they are calling "Contracted Regular Employees". This allows them to treat contractors are permanent staff under the ITAR rules and it's then easy to share info.

A slide I saw on the subject defined this as someone with a 12+ month contract under client supervision and tasked daily! This is clearly going to fall under the HMRC "disguised" employee category

So the question is, and it's not easy to answer I'm sure, is if the ACTUAL working practices don't change, my contract to the intermediate agency doesn't change and the end client contract is changing only to work around ITAR, would I then be liable to fall in to IR35?

At present, I set my own hours, take holidays without needing approcal, receive no supervision whatsoever and am free to work tasks in whatever manner I deem fit - I have a statement of work that lists deliverables/effort required/timescales and if I need help to the client assists but generally I just get on with it. I get zero employee perks and my contract with the intermediate agency has some very clear anti IR35 clauses in it. I feel at the moment I'm well out of IR35 and am employed on a project that when finished means I too finish. But this crazy "Contracted Regular Employee" title makes me worried that HMRC would look only at that title, and not the day to day true working environment and try to force me on to PAYE.

Does anyone have experience of this or can offer any advice?

[jamesbrown]

So the question is, and it's not easy to answer I'm sure, is if the ACTUAL working practices don't change, my contract to the intermediate agency doesn't change and the end client contract is changing only to work around ITAR, would I then be liable to fall in to IR35?

It's fairly easy to answer in the sense that it's your actual working practices that matter, and not an administrative title. However, in practice, were you to suffer an investigation, I think you'd be in an uncomfortable/difficult position. Also, I think this would qualify as a material change w/r to obtaining a (new) IR35 contract review (likely to fail) or maintaining loss insurance, so you'd be quite exposed. Bottom line, if the working practices are supportive of an outside position, then you're outside, regardless of any titles imposed, but this would certainly make your situation more difficult under investigation. Being in the US, they may also decline to provide evidence to a tribunal (ordinarily, this might help, but probably not in your scenario). My advice would be to solicit a Confirmation of Arrangements document that outlines your working practices as being clearly outside IR35 and have this signed by someone at the client that knows your working practices. They shouldn't have a problem with this, as it's about deemed export regulations and not your employment situation.

[Proeliator2001]

Thank you for the reply, backs up my feeling that it might not be the end of the world but certainly introduces some risk that wasn't present before. The Confirmation of Arrangements document certainly sounds like it'd be a significant help in fighting my case should it ever come to that. I'll have a look around for examples and pick one that seems best suited as a baseline. Thanks again.

[Lance]

Thank you for the reply, backs up my feeling that it might not be the end of the world but certainly introduces some risk that wasn't present before. The Confirmation of Arrangements document certainly sounds like it'd be a significant help in fighting my case should it ever come to that. I'll have a look around for examples and pick one that seems best suited as a baseline. Thanks again.

I've heard of a firm of solicitors who'll write you one for £500 and it's backed up by their insurance.
I can't remember the name of the firm I'm afraid, but perhaps QDOS or similar will be able to provide something and underwrite it with their insurance.

[VectraMan]

ITAR!

A previous place I worked struggled long and hard with ITAR and eventually gave up and moved the development to the US.

Surely any confirmation of arrangements document would be too risky from the client's point of view if it contradicts the arrangements they have to have? Perhaps better to ask for a rate rise so you're no worse off and then simply be inside IR35.

[jamesbrown]

Surely any confirmation of arrangements document would be too risky from the client's point of view if it contradicts the arrangements they have to have?

Not if the scope is carefully explained. Clearly, the OP is very valuable to them, otherwise they wouldn't be having the discussion. QDOS has a free template for the CoA.

[Proeliator2001]

I managed a rate rise to compensate for dividend tax increase this year and know fine well that's the last I'll ever get! So no chance. Also, the client has told its intermediary sub-contractors/managed service providers that this ITAR fallout is to be "cost neutral"! Not sure which world those people live in but hey ho.

Funnily enough, your comment about moving development to US is why this has all come about. Only some of the product is designed in US and it's those bits that's causing the rest of us issues as the client just can't easily divide the mountains of info it has out in to ITAR and non-ITAR sensitive piles. And to be fair my role has me cutting across it all so it'd be no use if they did.

I also fear they may not wish to sign such a document if it contradicts the ITAR rules - it's a bind we're all in and I hope some pragmatism can prevail.

But yes, ITAR is hell to work under. ITAR and HMCR. It's a new type of torture for me.