Receiving payment on account/up front

[TheCyclingProgrammer]

I think the MOO argument can be successfully guarded against in this case by making it clear, similar to a retainer agreement, how and when the prepaid time can be used and by making it clear your right as a supplier to cancel the agreement (and refunding the client).

If they are paying for several months I would look to ensure you both have the right to terminate at the end of every two week block of work given sufficient notice.

That said I think so long as your working practices are in order wrt direction and control then I wouldn’t worry too much about this.

[jamesbrown]

Agree with the above comment. Should be easily guarded against. Retainer-type arrangements are common practice, and make good business sense, which always comes before IR35.

[WordIsBond]

I also agree. I use retainers with foreign clients and make sure SDC is clear. Of course, HMRC has not investigated me for IR35, so maybe if they ever do I'll regret using retainers. I don't do much in the UK, but when I do have domestic clients I don't use a retainer both because I'm less concerned about payment hassles and because I don't want a sniff of MOO with UK clients. If IR35 weren't around, I'd use a retainer here, too. One more example of bad tax law distorting good business behaviour.

My contracts have a cancellation clause that says unused retainer will be refunded.

My approach is somewhat different from what you've mentioned, though. My retainer is paid monthly at the beginning of the month, and is 75% of what I estimate average monthly billing will be. At the end of the month I bill for the excess over the retainer. That way most of the funds are received timely, and the rest comes when it comes.