IR35: Planning for April 2021 – should I stay or should I go?

[jamesbrown]

I am not saying they are at an elevated risk by being a subcontractor. I am saying that your argument of the opposite is wrong and that being a subcontractor affords no additional protection. The risk they face is from the client deeming that the working practices adopted currently are inside and that there has been no change in those working practices. In short, the risk is that, under investigation for old work, the client would sink quantum77. That is a real risk, even if the actual risk of investigation remains low.

[BlasterBates]

Again, you’re still not getting it. That article is about subcontracting from the perspective of the PSC, not a company further up the supply chain. If quantum77 can subcontract work, that is a pointer away from IR35, although substitution would be better. If quantum77 is subcontracted to complete work, that is not a pointer and has no bearing on their ability to assign, subcontract or substitute.

This is also off-topic because quantum77 was asking about the risk to them from the client issuing a negative SDS for working practices that looked exactly like their old working practices.

Yes but the question was about whether if at some point the contactor were to move inside IR35 the HMRC would therefore use this as proof that the contractor was not actually outside beforehand. This is unlikely as the contractor would have been subcontracting. In fact there were one or two cases where the judge has split the time at the client between the initial phase and the latter phase, whereby the initial phase at the client was deemed outside IR35, thus demonstrating being inside IR35 at some later stage has no legal bearing on any earlier contracts. Each contract has to be judged independently. Of course HMRC may decide to audit Quantum77 but this can happen for all sorts of reasons. The risk to Quantum77 isn't any higher than on any other contract. He needs to get his contract and working conditions checked and get some IR35 insurance, but not worry about what may happen in the future.

You seem to be arguing that Quantum177 is at risk of an investigation of IR35. Yes don't disagree, anyone is at risk of IR35 who has a contract outside IR35, but it isn't an elevated risk simply because you are a subcontractor.

Obviously the paperwork needs to be in place such as an SDS for the contractor who is subcontracting.

[jamesbrown]

https://www.contractorcalculator.co.uk/contractors_ir35_substitute_subcontractor_helper.a spx



If at some point the contractor changes his status then he won't be able to subcontract any more. That new contract will be completely different to one where the contractor is subcontracting.

Again, you’re still not getting it. That article is about subcontracting from the perspective of the PSC, not a company further up the supply chain. If quantum77 can subcontract work, that is a pointer away from IR35, although substitution would be better. If quantum77 is subcontracted to complete work, that is not a pointer and has no bearing on their ability to assign, subcontract or substitute.

This is also off-topic because quantum77 was asking about the risk to them from the client issuing a negative SDS for working practices that looked exactly like their old working practices.

[BlasterBates]

Well, quite, so why do you think that is relevant to their IR35 status? If quantum77 contracts to a company that has been subcontracted to supply labour to an end client and quantum77 looks like an employee of that end client, why on earth would the contract between companies further up the supply chain from quantum77 matter w/r to the IR35 status of quantum77? Again, it isn't quantum77 that is subcontracting work.



Who said it did? You're the one saying there is no risk because of something, something, something "subcontracting". In reality, if the client deems all current work of a given shape to be inside IR35, then it stands to reason that all earlier work of the same shape would be considered inside too (by the end client), and I believe that is the risk that quantum77 was enquiring about.

https://www.contractorcalculator.co.uk/contractors_ir35_substitute_subcontractor_helper.a spx

Subcontractors who have been engaged on a basis that is intrinsic to the completion of the contract, or where the lead contractor needs additional specialist skills to complete the project, are the most likely to be viewed by HMRC as evidence that the contractor is not a disguised employee.

If at some point the contractor changes his status then he won't be able to subcontract any more. That new contract will be completely different to one where the contractor is subcontracting.

[jamesbrown]

The quote is "sub some of the work to me", I take it to mean "sub some of the work to me". What do you think he means?

Well, quite, so why do you think that is relevant to their IR35 status? If quantum77 contracts to a company that has been subcontracted to supply labour to an end client and quantum77 looks like an employee of that end client, why on earth would the contract between companies further up the supply chain from quantum77 matter w/r to the IR35 status of quantum77? Again, it isn't quantum77 that is subcontracting work.

I don't see how this has any elevated risk of IR35 above any beyond any other contract.

Who said it did? You're the one saying there is no risk because of something, something, something "subcontracting". In reality, if the client deems all current work of a given shape to be inside IR35, then it stands to reason that all earlier work of the same shape would be considered inside too (by the end client), and I believe that is the risk that quantum77 was enquiring about.

[BlasterBates]

Did you actually read what quantum77 wrote? The work is being subbed to the company that would contract with quantum77. There is nothing to suggest that quantum77 could subcontract the work. It is perfectly possible that quantum77 has an employee-type relationship with the end client, regardless of any contractual details elsewhere in the supply chain (which are irrelevant to IR35 because it explicitly looks through them). But your argument seems to be "forget about IR35 because no one ever gets caught". Yeah, especially permies.

The quote is "sub some of the work to me", I take it to mean "sub some of the work to me". What do you think he means?

I don't see how this has any elevated risk of IR35 above any beyond any other contract. He just needs to get his contract reviewed. I think HMRC have more important things to do than spend their time investigating a contractor actually subcontracting/substuting as is normal for contractors who aren't inside IR35.

[jamesbrown]

A contract where you can subcontract is clearly outside. Very tenuous to suggest if this contractor ends up inside at some point that the HMRC will open up an investigation on his subcontractors during a previous contract.

In the 20 years of IR35 there has been a sum total of 35 court cases most which were won by the contractor. This is the least of your worries.

Did you actually read what quantum77 wrote? The work is being subbed to the company that would contract with quantum77. There is nothing to suggest that quantum77 could subcontract the work. It is perfectly possible that quantum77 has an employee-type relationship with the end client, regardless of any contractual details elsewhere in the supply chain (which are irrelevant to IR35 because it explicitly looks through them). But your argument seems to be "forget about IR35 because no one ever gets caught". Yeah, especially permies.

[BlasterBates]

You're confusing two separate things here. For IR35 purposes, the relationship in question is between the end client and the contractor as a natural person (hence the "hypothetical contract"). The nature of the supply chain above the PSC is completely irrelevant to IR35, by definition, since it looks through these intermediaries. If quantum77 were able to subcontract the work then, sure, that would help, but that is a completely different thing. Also, subcontracting, assigning and substitution are all separate things and the main test is substitution.

A contract where you can subcontract is clearly outside. Very tenuous to suggest if this contractor ends up inside at some point that the HMRC will open up an investigation on his subcontractors during a previous contract.

In the 20 years of IR35 there has been a sum total of 35 court cases most which were won by the contractor. This is the least of your worries.

[jamesbrown]

If he is subbing out the work then it's pretty clearly outside IR35. If that were to change then you can cancel the contract. An inside IR35 contract is not going to allow subbing and there would be a clear change of contractual obligations.

I don't see any danger here but you could get some advice from an IR35 expert if you're worried,

You're confusing two separate things here. For IR35 purposes, the relationship in question is between the end client and the contractor as a natural person (hence the "hypothetical contract"). The nature of the supply chain above the PSC is completely irrelevant to IR35, by definition, since it looks through these intermediaries. If quantum77 were able to subcontract the work then, sure, that would help, but that is a completely different thing. Also, subcontracting, assigning and substitution are all separate things and the main test is substitution.

[BlasterBates]

Thanks for this thread cojak

I've been working for a client for a few years, and had all contracts checked by QDOS and deemed outside IR35. My current contract is due to finish this month and I plan on finishing there. There's never been a SDS, and they're fairly IR35 clueless.

A contractor friend of mine is looking for work and asked if he could take the contract with them post April, and sub some of the work to me. I'm happy for him to do so, but my worry is it'll recreate the link between the client and me (although via 3rd party) and if they decide to make all new contacts inside IR35 I'll be adding an unnecessary retrospective investigation risk.

Am I worrying over nothing?

If he is subbing out the work then it's pretty clearly outside IR35. If that were to change then you can cancel the contract. An inside IR35 contract is not going to allow subbing and there would be a clear change of contractual obligations.

I don't see any danger here but you could get some advice from an IR35 expert if you're worried,