Falling Foul of IR35

[malvolio]

We certainly wouldn't withhold cover if the case was lost due to reasons beyond the contractor's control, i.e. the upper level contract and unexpected testimonies from the end client.

Insurance is offered on the basis of a working and business practice questionnaire alone and, providing no material fact has been withheld by the contractor, there are no other issues that could affect the cover.

Re substitution: for a right to be genuine the client must only be able to reject a replacement on reasonable grounds related to skills, qualifications etc. The end client must not have an unreasonable right of veto. If you had a good, unfettered right of substitution in your contract and the upper level agreement and then the client rejected a replacement without giving reason, you may have grounds to challenge the decision on a legal basis.

Reading the case law summary itself, it seems that there wasn't a RoS in the uppoer contract while there was in the lower one. Thre are some advocating that the contractor should be suing the agency for misrepresentation, and that would be an interesting discussion...

[Chugnut]

Reading the case law summary itself, it seems that there wasn't a RoS in the uppoer contract while there was in the lower one. Thre are some advocating that the contractor should be suing the agency for misrepresentation, and that would be an interesting discussion...

Spot on.

How the agency can ask you to countersign a contract containing a substitution clause when the upper level once makes no mention of it beggars belief. This could be a good thing; with the potential of legal action knocking on agencies doors, maybe they'll be more likely to mirror terms.

[IR35 Avoider]

On the subject of closing companies to minimise IR35 risks, I would have thought that it would be perfectly acceptable (indeed sound commercial practice) to start a new company for each client. After all, each client is a unique set of circumstance with different IR35 risks. You don't want the unexpected failure of one contract to be paid for by the profits of another. The limited company concept exists for the purpose of ring-fencing risk. You are entitled to use it for that purpose. It's the same principle of minimising risk followed by the film industry, when they set up a separate company for each film.

[ASB]

Spot on.

How the agency can ask you to countersign a contract containing a substitution clause when the upper level once makes no mention of it beggars belief. This could be a good thing; with the potential of legal action knocking on agencies doors, maybe they'll be more likely to mirror terms.

I'm not sure about this and whether there is any question of misrepresentation in any way. [Unless of course the agency warranted the clauses were mirrored].

It is common for terms to be different in contracts throughout any supply chain. These can be contradictory and expose certain places in the chain to be at a greater or lesser risk in the event of things going wrong.

In this case it appears there contactor had a RoS but the agency didn't. So what?

The result of this is surely only that if the contractor had decided to substitute and the end client refused then the agency has a problem. They may get sued by the contractor for breach - because there is now an actual breach of condition, equally the client could sue the agent for them failing to provide the service the client had bought.

Unfortunately of course with IR35 it is a complete fiction that gets judged, the prevailing "wisdom" seems to go clients wouldn't accept a substitute therefore you have no right. It is wholly wrong to place any more weight on the clients contract than the suppliers.

Just because you haven't tried to enforce a clause deosn't make it any less valid.

[Chugnut]

I'm not sure about this and whether there is any question of misrepresentation in any way. [Unless of course the agency warranted the clauses were mirrored].

It is common for terms to be different in contracts throughout any supply chain. These can be contradictory and expose certain places in the chain to be at a greater or lesser risk in the event of things going wrong.

In this case it appears there contactor had a RoS but the agency didn't. So what?

The result of this is surely only that if the contractor had decided to substitute and the end client refused then the agency has a problem. They may get sued by the contractor for breach - because there is now an actual breach of condition, equally the client could sue the agent for them failing to provide the service the client had bought.

Unfortunately of course with IR35 it is a complete fiction that gets judged, the prevailing "wisdom" seems to go clients wouldn't accept a substitute therefore you have no right. It is wholly wrong to place any more weight on the clients contract than the suppliers.

Just because you haven't tried to enforce a clause deosn't make it any less valid.

Certainly a grey area.

I was assuming that anyone familiar enough with IR35 and the need to have a sub clause in their contract, would be asking the agent whether there was one in the upper level contract as well. So the assumption included the agent being economical with the truth regarding the client's contract terms.

The agency is the only party privy to both contracts by default. If they knew that the terms in one could be nullified by the other, but the other parties didn't, I'd say they were leaving themselves open to justifiable legal action by either party.

After all, as the service provider I'd be under the impression from my contract that I could sub the work out but be perfectly within my rights to pay the sub less, thus still being able to generate an income stream for the company. Any attempt to invoke this sub is then rejected by the client. My company can't generate income for that period. That's grounds for misrepresentation surely?

[malvolio]

No, its's simpler than that. The agency (naming no names, of course) have signed a contract withthe contractor's company containing a clause allowing the use of a substitute, subject to client approval, which is entirely valid and normal in IR35 terms. They also signed a contract with the client stating that only the contractor himself would be allowed to do the work.

As per Dacas/Muscat rulings, the agency is acting as the agent of the client and so is deemed to be acting with the client's full knowledge and permsision. So why should they want to include a clause in the contractor's side that they know they have no way of fulfilling? Unless, of course, they were telling lies in order to secure the services of the contractor and so retain their income stream.

The real message is simply not to deal with this agency: by ensuring you are going to be liable for IR35 by virtue of a contract you can't even see, they are effectively paying you 20% less than any agency that will give you a legitimate contract. That is the message that ought to be shouted from the rooftops.

[Old Greg]

No, its's simpler than that. The agency (naming no names, of course) have signed a contract withthe contractor's company containing a clause allowing the use of a substitute, subject to client approval, which is entirely valid and normal in IR35 terms. They also signed a contract with the client stating that only the contractor himself would be allowed to do the work.

As per Dacas/Muscat rulings, the agency is acting as the agent of the client and so is deemed to be acting with the client's full knowledge and permsision. So why should they want to include a clause in the contractor's side that they know they have no way of fulfilling? Unless, of course, they were telling lies in order to secure the services of the contractor and so retain their income stream.

The real message is simply not to deal with this agency: by ensuring you are going to be liable for IR35 by virtue of a contract you can't even see, they are effectively paying you 20% less than any agency that will give you a legitimate contract. That is the message that ought to be shouted from the rooftops.

I assume it's a matter of public record who the agency is now? If so, would you be able to either name or post a link to a fuller account of the case?

[mjshrimpton]

I assume it's a matter of public record who the agency is now? If so, would you be able to either name or post a link to a fuller account of the case?

http://www.bailii.org/uk/cases/UKSC/2007/SPC00618.html

SPRING

[Old Greg]

http://www.bailii.org/uk/cases/UKSC/2007/SPC00618.html

SPRING

Cheers.

[The AntiChrist]

So has Spring put their house in order since then, or are they still following the same practise ?