New gig sold as outside IR35 - how to make sure this is the case ?

[philgo]

Their clause cannot override the law.


Name me one thing they didn't destroy.

Again, based on what Agency Consultancy LTD told me, determination is not done by end client but by myself using the tool they provide me. Explanation he provided me is that my LTD contract is with Agency Consultancy LTD not with end client hence no determination nor liability for the latter but for myself as per chapter 8. Agency Consultancy LTD is less than 50 people and within turnover limit so Agency Consultancy LTD explanation would makes sense. Then whether this is acceptable I do not know so next step is to see a draft contract to understand full terms and liabilities.

[jamesbrown]

Not sure I understand all of that but what I know is that I should try to get a draft contract from the consultancy ASAP and check the terms.

Then, I am not surprised but it seems very very complicated to work outside IR35 now days, not like pre 2021.
It clearly shows that the rules put in place by the gov are subject to far too many interpretations depending on too many factors so essentially going against this business.
I am not even talking about the massif tax increase with dividend allowance reduction and the increase of the CT tax versus pre 2021.
For people only looking only at the net income in pocket, the sad reality is that all the work and prep you have to put in place on top of work you have to do for clients does not overly surpass a contract inside IR35 anymore. I would say it's even less paid for some contracts and the worst is that you can get investigated down the line by HMRC even if you have tried to be careful. They clearly destroyed this industry.

It's fairly straightforward:

1. Are you working on an end client site and/or interacting with end client staff regularly (client being the entity that commissioned the service, not the consultancy/agency)?
2. Is the end client a medium or large company according to the CA 2006?

If your answer to both of these questions is "yes", then the contract falls under Chapter 10 and you must insist on an SDS from the end client (via the agent/consultancy). You should also check the contract carefully for claw-back clauses, which may work, in principle. This has nothing to do with overriding statute law. If your answer to (1) is "no", then it may be a fully outsourced service and you should answer (2) with respect to the consultancy, which is then the "end client" in your chain. If the answer to (2) is "no", then it's Chapter 8 (aka "old IR35"), else Chapter 10.

The only real complexity here is whether it is truly an outsourced service if the answer to (1) is "no". In most cases, and I suspect in your case, the answer to (1) is clearly "yes", so there is really no complexity.

[jamesbrown]

Again, based on what Agency Consultancy LTD told me, determination is not done by end client but by myself using the tool they provide me. Explanation he provided me is that my LTD contract is with Agency Consultancy LTD not with end client hence no determination nor liability for the latter but for myself as per chapter 8. Agency Consultancy LTD is less than 50 people and within turnover limit so Agency Consultancy LTD explanation would makes sense. Then whether this is acceptable I do not know so next step is to see a draft contract to understand full terms and liabilities.

Your "Agency Consultancy" is clueless, I'm afraid (assuming they've said exactly what you reported here). Ask them to explain why this is a fully contracted out service under Chapter 10. Expect tumbleweed and/or nonsense. If you're largely working directly with the client, it ain't outsourced.

[malvolio]

Their clause cannot override the law.

It can if you agree to recompense them for their losses...

[philgo]

It's fairly straightforward:

1. Are you working on an end client site and/or interacting with end client staff regularly (client being the entity that commissioned the service, not the consultancy/agency)?
2. Is the end client a medium or large company according to the CA 2006?

If your answer to both of these questions is "yes", then the contract falls under Chapter 10 and you must insist on an SDS from the end client (via the agent/consultancy). You should also check the contract carefully for claw-back clauses, which may work, in principle. This has nothing to do with overriding statute law. If your answer to (1) is "no", then it may be a fully outsourced service and you should answer (2) with respect to the consultancy, which is then the "end client" in your chain. If the answer to (2) is "no", then it's Chapter 8 (aka "old IR35"), else Chapter 10.

The only real complexity here is whether it is truly an outsourced service if the answer to (1) is "no". In most cases, and I suspect in your case, the answer to (1) is clearly "yes", so there is really no complexity.

[QUOTE=jamesbrown;n4281330]

Yes I will need to go to client site regularly as I will need to interact with lots of end client staff.

How do I determine client company size easily myself ?

Thanks for the logical tree. I still need to get clarity from the Agent/consultant. To clarify what was said, I asked the agent/consultant to get the SDS of the end client. Agent/consultant replied that the determination would be done by myself using a tool he would share with me. He explained then that it works that way because the contract is between my LTD and his LTD and then he has another contract with the end client. I guess this is what you are referring as outsourced service which you say does not work in this case beacuse I will need to go to client site regularly. Correct?

[jamesbrown]

Yes I will need to go to client site regularly as I will need to interact with lots of end client staff.

How do I determine client company size easily myself ?

Thanks for the logical tree. I still need to get clarity from the Agent/consultant. To clarify what was said, I asked the agent/consultant to get the SDS of the end client. Agent/consultant replied that the determination would be done by myself using a tool he would share with me. He explained then that it works that way because the contract is between my LTD and his LTD and then he has another contract with the end client. I guess this is what you are referring as outsourced service which you say does not work in this case beacuse I will need to go to client site regularly. Correct?

You should ask the consultancy to confirm, in writing, the size of the end client under the CA 2006 definition. Assuming they are not small, you should then insist on the SDS. In principle, the risk is with them, but you would need to demonstrate your own due diligence to avoid any accusation of fraud that would make YourCo jointly liable. The number of contracts or length/complexity of the contractual chain is completely irrelevant, hence my earlier comment about the consultancy being clueless. What matters is the *nature* of the contract between the end client and the consultancy, specifically whether it is a contract for labour or a managed service. More here:

https://www.gov.uk/hmrc-internal-man...anual/esm10010

Again, feel free to ask for written confirmation from the consultancy that the supply is fully contracted out and delivered at arms length as a managed service by the consultancy (which could indeed mean Chapter 8 if the consultancy is small), but it clearly isn’t a managed service if you’re regularly engaging with end client staff.

[philgo]

Again, feel free to ask for written confirmation from the consultancy that the supply is fully contracted out and delivered at arms length as a managed service by the consultancy (which could indeed mean Chapter 8 if the consultancy is small), but it clearly isn’t a managed service if you’re regularly engaging with end client staff.

So if above is the scenario is question what can be done ?

[malvolio]

So if above is the scenario is question what can be done ?

Realistically? Decide that it is inside IR35 and pitch the rate accordingly at around 25% over the outside rate - or walk away. The intermediate "consultancy" does not come across as someone with whom to do business, to be honest.

[hobnob]

Again, feel free to ask for written confirmation from the consultancy that the supply is fully contracted out and delivered at arms length as a managed service by the consultancy (which could indeed mean Chapter 8 if the consultancy is small), but it clearly isn’t a managed service if you’re regularly engaging with end client staff.

I'm not sure about the bit in bold. E.g. suppose that Capita or Infosys come in to run an organisation's service desk, and they hire you as a contractor. In that scenario, you might be working on the end client site and talking to end client staff, but the consultancy would still be providing a managed service. (In that particular example, I'd say that working on a service desk is inherently inside IR35, but that's due to SDC and distinct from the "managed service" question.)

[jamesbrown]

I'm not sure about the bit in bold. E.g. suppose that Capita or Infosys come in to run an organisation's service desk, and they hire you as a contractor. In that scenario, you might be working on the end client site and talking to end client staff, but the consultancy would still be providing a managed service. (In that particular example, I'd say that working on a service desk is inherently inside IR35, but that's due to SDC and distinct from the "managed service" question.)

It’s completely pointless to view any question about IR35 through the lense of Crapita or Infosys or any similar consulting business because these companies are simply not within the scope of IR35 in the most basic sense (their consultants are employed, they don’t own more than 5% of the share capital etc. etc. etc.). Read ESM 10010 and the worked examples therein, which should give you a good idea of what is meant by a managed service:

https://www.gov.uk/hmrc-internal-man...anual/esm10010

As I noted earlier, this is about the only question for the OP that is somewhat more nuanced, in theory, but my guess is that the OP will read ESM 10010 and be left in absolutely no doubt that the consultancy is not providing a managed service. It’s quite rare. Also, in citing the mere presence of a contract between the consultancy and the OP’s company as the basis for this determination, rather than the substance of the contract between the end client and consultancy, the OP has already revealed that the consultancy is clueless about IR35 and not to be trusted.