Oil and gas sector - IR35

[northernladuk]

Am I right in saying though that just one of the three pillars is enough to get an Outside determination?

Not any more. That's pre April2020 thinking.

[eek]

Not any more. That's pre April2020 thinking.

It's still true - it's just that the end client now needs to agree that one of those three conditions are met not the contractor. And that is why Mutual obligation is going to be so important:-

1) any company is going to usually want supervision, direction and control unless the skillset is unique.
2) few companies will accept a substitute they really want the person they employ
3) Mutual obligation is very awkward and hard to avoid in a world where fixed term contracts and zero hour contracts are legal.

[dsc]

How many tribunal cases have been won based on MOO alone? Imho MOO alone is not enough to push you outside IR35, which is probably why Aker went with lack of MOO and SDC, but decided that RoS is hard to do, so left that out hoping that would still win them any case brought forward by HMRC. Then again HMRC probably thinks that you need all three and a bunch of other stuff to be outside...

[Fred Bloggs]

My immediate reaction to eazy's post was that they will be first against the wall when HMRC find out...

Aker Contractors are a brave firm by the looks of it but one I admire..

Likely they risk assessed this and see a business opportunity ahead. "Hey Mr O&G operator. Your projects are behind schedule? Come and talk to us, we can help".

[sludgesurfer]

I'd say that most of Aker's contractors are tied to one particular project with a well defined deliverable. They also have a history of massive headcount increases and reductions as the projects come and go. You only have to look at their office by the airport to see how many floors are empty.

This sits in stark contrast to the operators where contractors roll from project to project or are tied to a specific asset indefinately.

My own operator client rolled out it's "IR35 Shield" questionnaire last week. The vast majority of questions were pre-populated with answers hidden. No SDS yet.

[dsc]

The issue with most O&G projects is that they last years, so even if you have a bunch of contractors tied to a single project they might be there for 3-5 years (or more) depending on the size of the job. This will most likely raise eyebrows at HMRC, increasing the risk of someone looking into it.

[eek]

The issue with most O&G projects is that they last years, so even if you have a bunch of contractors tied to a single project they might be there for 3-5 years (or more) depending on the size of the job. This will most likely raise eyebrows at HMRC, increasing the risk of someone looking into it.

But would you need all those specialist contractors all that time or would some only be there at the beginning of the project and others with other skills in the middle / end phases.

[dsc]

Depends on what the task is, but CAD people for example would easily be needed for a long time if say a new plant is being done. Same goes for my branch which is control and visualisation where you do the API for the whole plant including all the code to interact with all plant devices, something like this from scratch can easily take 3+ years for a medium size plant. What you have to remember is that O&G is heavily safety oriented and the amount of checking and testing is on another level (and I've not really seen teams with dedicated testers).

With task durations running into years you can see how sooner or later someone is going to ask, why didn't you just hire a bunch of permies?

[eazy]

O&G Projects

BP Glen Lyon project costing $5 Billion+ lasted over 6 years. Handful of contractors who worked on the concept, FEED and detailed design were on it for 8 years.

I worked on a ops support contract for an engineering company during the down turn for several years. The engineering company receives an SOR (scope of requirements) from the oil company, the engineering company asks contractors to prepare a CTR (Cost Time Resource) for each discipline needed to complete the required workscope. CTR’s are reviewed & approved by the oil company. Once approved, budget or hours cannot be exceeded without scope change and further Oil company approvals.

When there are no SOR’s & associated CTR’s, the contractors have no work and nothing to book to and are not paid. We were regularly in this situation where we could not predict the workload and ended up booking 20 hours or less a week for several years. Rates were cut when the oil price dropped. Normally there were several SOR’s (small projects) with some with hours as low as 20 and high of 200 hours for my discipline.

Contractors were let go if there wasn’t work for them for few weeks, did not get paid for notice period if there was no work. Length of engagement is less important in these kind of engagements wrt IR35 as majority of the other factors indicate self-employment or outside IR35 status.

Most of the engineering companies currently have similar working practices.

[dsc]

Length of engagement is less important in these kind of engagements wrt IR35 as majority of the other factors indicate self-employment or outside IR35 status.

I agree that IR35 and length of contract doesn't really go hand in hand, but you could argue that subsequent SORs are separate projects and that you are pushed from one project to another constantly. I know overall it forms a single project, but I'm sure HMRC would have issues with it.