Legitimacy of this model post April

[MrC]

Contractor< "consultancy" < "client"

Where the consultancy has SOW, fixed deliverables/price etc with the client. Consultancy pays contractor a day rate is not a permanent employee. Contractor performs delivery of services on client site.

Client is big. Ie over 50 employees and 10M turnover
Consultancy is small and under these.

So working practices are outside. But who is the client and who should be making the determination post April?

(Or is the scenerio exempt from determination as the consultancy is in effect the client and is small)

[GhostofTarbera]

End client

Have you been living under a bridge ?




Sent from my iPhone using Contractor UK Forum

[MrC]

I'm not convinced it's as straightforward as you're suggesting.

Let's say our client in my scenerio is an insurance company who sell motor insurance to the public. Well then Joe Smith with his beemer is the end client by some definition. Does he make the determination.

Moreover a consultancy isn't subject to it35 with the end client so what makes this a given?

Would be really helpful if you could explain the basis of your conclusion. What are the criteria for "end client"

[Patrick@Intouch]

The end client can be assessed as being the ultimate entity in the chain asking for a provision of labour.

If company A has a development need and asks company B to provide labour resource to facilitate the delivery of the whole project, or areas thereof then company A is the end client.

If, however company A outsources the delivery of the project, or areas thereof to company B AND it is up to company B to decide on resource levels and source that labour needed then company B should be considered to be the end client.

In the second scenario, company A is the consumer and company B is producing the product that company A consumes.

[cojak]

The end client can be assessed as being the ultimate entity in the chain asking for a provision of labour.

If company A has a development need and asks company B to provide labour resource to facilitate the delivery of the whole project, or areas thereof then company A is the end client.

If, however company A outsources the delivery of the project, or areas thereof to company B AND it is up to company B to decide on resource levels and source that labour needed then company B should be considered to be the end client.

In the second scenario, company A is the consumer and company B is producing the product that company A consumes.

Thanks Patrick - that's the clearest explanation I've come across so far.

[GhostofTarbera]

The end client can be assessed as being the ultimate entity in the chain asking for a provision of labour.

If company A has a development need and asks company B to provide labour resource to facilitate the delivery of the whole project, or areas thereof then company A is the end client.

If, however company A outsources the delivery of the project, or areas thereof to comapny B AND it is up to company B to decide on resource levels and source that labour needed then company B should be considered to be the end client.

In the second scenario, company A is the consumer and company B is producing the product that comapny A consumes.

So company B can be 3 friends that form a company together that all worked for company A currently but now for company B to avoid IR35 ?

Fill our boots time


Sent from my iPhone using Contractor UK Forum

[Patrick@Intouch]

So company B can be 3 friends that form a company together that all worked for company A currently but now for company B to avoid IR35 ?

Fill our boots time


Sent from my iPhone using Contractor UK Forum

Not quite, if those three friends were still engaging with clients in the same way then the same rules would still apply to each engagement. If that company however were engaged to deliver a product or specified deliverable and could use any of the "in-house" resource at its disposal (or engage other resource at its discretion) then that would certainly look like an engagement of a true B2B nature and not a contract for service.

However, that same scenario would apply no matter the number of friends or director/shareholders.

I think the point really is that company B in my example would be a business providing a service not a business providing labour and the key then might be negotiating contract between a PSC and a service consumer that allows the PSC to deliver that service using whatever resource that company deems most appropriate, whether that be the director or A.N. Other. That would remove personal service from the equation and strongly suggest that IR35 shouldn't be applied to that engagement.

[DannyF1966]

So company B can be 3 friends that form a company together that all worked for company A currently but now for company B to avoid IR35 ?

Fill our boots time


Sent from my iPhone using Contractor UK Forum

The answer to this question seems to discourage doing that:

Contractors’ Questions: Will a partnership get around IR35 reform in 2020?

[jmo21]

I'm not convinced it's as straightforward as you're suggesting.

Let's say our client in my scenerio is an insurance company who sell motor insurance to the public. Well then Joe Smith with his beemer is the end client by some definition. Does he make the determination.

I'm not sure you have the slightest clue what you are talking about.

[jmo21]

So company B can be 3 friends that form a company together that all worked for company A currently but now for company B to avoid IR35 ?

Fill our boots time


Sent from my iPhone using Contractor UK Forum

From the document QDOS sent out last month:

CAN CONTRACTORS JOIN FORCES TO
AVOID THE NEW RULES?
Many contractors have considered closing their business and collaborating with other
contractors to ‘club together’, forming new companies to get around the new rules.
We stress that attempting to avoid a tax avoidance measure is unadvisable and this will not
enable contractors to achieve the desired outcome.
IR35 applies if:
• a worker (or their family), control more than 5% of the ordinary share capital
of the Personal Service Company; OR
• a worker (or their family) are entitled to receive more than 5% of any
dividends from the Personal Service Company: OR
• a worker receives, or could receive, payments or benefits from their company
which are not salary but could reasonably be taken to represent payment for
services they provide to clients.
While there is no clear definition of a Personal Service Company (PSC), which
HMRC often use to their advantage, this can be loosely defined as:
• a company that predominantly sells the services of an individual, or small
group of individuals, and
• the individual(s) providing the services are also owners/directors of the
company.
If a group of PSCs came together to form a new business this will not avoid IR35 and it will
still need to be a consideration for each contractor working within the new company - IR35
could still apply to each worker.
Therefore, simply pulling together to form a new business will not avoid IR35