Subcontract with a consultancy

[NeverBackToPerm]

I have a subcontractor agreement with a consultancy to "support the provision of consultancy services to third parties". I am exclusively working on projects for one end client. The contract does not name the end client or detail the specific projects but the consultancy has a separate contract with the end client and has had both their own employees and other subcontractors working with them previously.

1. Is it my working relationship with the consultancy, the end client or both that are relevant for IR35?
2. Post April would the inside/outside determination fall on the consultancy or the end client?

[jamesbrown]

I assume you mean private sector, post April 2020? Both are relevant in the sense that the consultancy would be the "fee payer" and the end client would be the "end client" and the one that issues the SDS. The hypothetical (IR35) contract would be formed with the end client, so it's those working practices that matter. The relationship you describe is basically like a standard agency gig. More generally, contracts with consultancies cover a broad spectrum.

[NeverBackToPerm]

Yes, private sector post April 2020.

I found a few threads on here discussing the difference between contractor -> agency -> client and contractor -> consultancy -> client but it didn't seem like any firm conclusions were reached. It feels a bit different because the consultancy is responsible for delivering the project whereas an agency just connects the contractor and client withoutout having knowledge or responsibility.

I have done a few contracts for this consultancy with gaps of months or years between and I have also been offerered work and turned it down. My working relationship with clients of the consultancy is the same as permanent employees of the consultancy. (However permanent employees at the consultancy are moved around different clients as the need arises whereas I am not.)

[jamesbrown]

Yes, private sector post April 2020.

I found a few threads on here discussing the difference between contractor -> agency -> client and contractor -> consultancy -> client but it didn't seem like any firm conclusions were reached. It feels a bit different because the consultancy is responsible for delivering the project whereas an agency just connects the contractor and client withoutout having knowledge or responsibility.

I have done a few contracts for this consultancy with gaps of months or years between and I have also been offerered work and turned it down. My working relationship with clients of the consultancy is the same as permanent employees of the consultancy. (However permanent employees at the consultancy are moved around different clients as the need arises whereas I am not.)

In your two examples of a possible supply chain, the contractor -> agency -> client supply chain is vanilla whereas the contractor -> consultancy -> client chain is not. The latter may encompass anything from a consultancy that operates like a body shop (i.e., you have minimal interaction with the consultancy, mainly with the end user) to a consultancy that supplies products you've helped to create to a range of end clients (i.e., you have minimal interaction with the end users, mainly the consultancy), with everything in between. With the public sector rules, the distinction is made between a "contracted out" service and a labour supply. For the former, the PSC remains responsible. From April 2020, if a consultancy is delivering a "contracted out" service for another private sector client, then the consultancy would be the end client (as well as the fee payer), because they would not be delivering a labour supply, rather a service.

Where do you fit on this spectrum? If you're doing end client work at the end client site alongside end client permies and contractors, with end client staff evaluating your work, then the consultancy is supplying you, a body, and the consultancy is the "fee payer" and the end client is the end client. Otherwise, if the consultancy is delivering a "contracted out" service, then the consultancy may be your end client (and fee payer). It doesn't sound like that though.

Either way, assuming the post April reforms work properly (), then there's an (expected) statutory responsibility to inform you of your status via an SDS if the end client is not a "small company" (at this stage, we only have draft legislation). So you should eventually learn about your status. It's a little less clear if the end client is a small company and you are supplying labour to them, as there's no responsibility to inform the supply chain about their small company status ().

Also note that, assuming the supply chain works properly (i.e., the SDS is passed down correctly), then the consultancy is, in all cases, the fee payer, as that is the last intermediary in the chain above YourCo. The only question is who is the end client, and it sounds like that is the "end client" as you describe them, because the consultancy is a body shop. Ultimately, I don't think it makes much difference. Unless you're working with small companies, you're going to get an SDS eventually.

My working relationship with clients of the consultancy is the same as permanent employees of the consultancy.

Not sure I follow you, but if you're saying that you are indistinguishable from permies at the end client, then your contract is probably inside IR35 too.

I assume you've had your contract and WP reviewed for IR35 already? Or maybe you haven't, in which case you should've done...

[BaldGuy]

Great answer, but so many questions and grey areas

JamesBrown answer is great... was looking for this explanation as to where a labor supply chain starts/ends.

At one extreme you have as mentioned the 'body-shopping' of contractors with minimal oversight/management. At the other you have the likes of the big 4 like Deloitte who generally wheel in a big team to manage the delivery but bring in SME to assist.

Who gets to decide though if it is a Contracted out service? Seems no black and white answer?

[NeverBackToPerm]

Thanks for the detailed response.

Not sure I follow you, but if you're saying that you are indistinguishable from permies at the end client, then your contract is probably inside IR35 too.

I assume you've had your contract and WP reviewed for IR35 already? Or maybe you haven't, in which case you should've done...

I meant from the client's perspective indistinguishable from a permie at the consultancy, i.e. client asks consultancy to carry out a project, consultancy sends me, client doesn't know whether I'm a permie at the consultancy or subcontracting with the consultancy.

I'm currently getting a QDOS contract and working practices review. I've described the situation to them and asked their view on who my end client is.

[jamesbrown]

Thanks for the detailed response.




I meant from the client's perspective indistinguishable from a permie at the consultancy, i.e. client asks consultancy to carry out a project, consultancy sends me, client doesn't know whether I'm a permie at the consultancy or subcontracting with the consultancy.

I'm currently getting a QDOS contract and working practices review. I've described the situation to them and asked their view on who my end client is.

OK, the latter is a sensible move (although it now creates a risk if you're inside and haven't accounted for that). What matters with IR35 is your day-to-day working practices. Those working practices will depend on who you work with, where and when you work, how you work and so on. If the consultancy is a body shop that offers people, rather than services, to clients - and it should be pretty clear whether they are or not - then the consultancy will not be your end client for IR35 purposes, merely the fee payer. Anyway, now you have a professional looking at your situation, you're on the right track.

[jamesbrown]

JamesBrown answer is great... was looking for this explanation as to where a labor supply chain starts/ends.

At one extreme you have as mentioned the 'body-shopping' of contractors with minimal oversight/management. At the other you have the likes of the big 4 like Deloitte who generally wheel in a big team to manage the delivery but bring in SME to assist.

Who gets to decide though if it is a Contracted out service? Seems no black and white answer?

Sorry, missed this. If it’s contracted out, then the end client would be the consultancy. They would also be the fee payer. Other than the lack of an Act of Parliament, I think the main source of fug at this stage (at least from my POV) is what constitutes “contracted out” when a supplier is providing a mixture of people and services under the same contract, but that is more second order. Ultimately, though, it is for the supply chain to resolve, not the PSC. An SDS should be provided, unless the end client (whoever that may be) is small. I think the main risk for a PSC is ensuring they operate the rules as now when the end client is a small, given the lack of a statutory responsibility to propagate that down the supply chain. In other words, if you don’t get an SDS, it would be safe to assume it’s your responsibility (even though it might not be).