Newbie - Hays, Citi Group and IR-35

[springy]

Hello, I am new here and my first post, so go easy.

I am going contracting very soon. The agency I am going through is Hays, and they have given me options on how I can be paid. PAYE, Umbrella or LTD. Now I rather go limited.

I got the contract and then got an account to look it over for me. The contract falls within the IR-35.
Now the account then told me,

You may wish to ask Hays for an IR35 compliant contract….we know they have one!

So now, I went back to Hays and they said they have not got another one.

Now wanted to ask if there are anyone out there who is contracting through Hays and Citi and has a contract that falls under the IR-35. Reason why I am asking is because I am not sure if I should pursue down the road of trying to lay my hands on an IR-35 free contract.

[Craig@Clarity]

Agency use the term "IR35 friendly contract" so they perhaps didn't put 2 and 2 together?

The contract between your limited company and your agency will have little relevance in determining your IR35 status. What will actually count is your working relationship with the end client and what happens on a day to day basis on site. "If" HMRC investigate you for IR35, they will look through the contract between your limited company and the agency (lower contract) and assess your IR35 status based on a hypothetical contract.

To further support why the lower contract is irrelevant for IR35 is that if the upper contract (between the agency and the end client) does not mirror the "IR35 friendly" clauses in the lower contract, you can see this is useless. Of course, the lower contract is important from a commercial point of view since it sets out termination periods, insurance requirements, IP etc.

[VFV]

Hays do have a specific template for contractors going down the Ltd route. When i first registered with them back in July they gave a copy of their standard contracts to have a look at, and there was one for normal employees, one for PAYE contractors and one for contracting via a Ltd company. So definitely ask them again!

[LisaContractorUmbrella]

As Craig has said Springy the type of contract your are provided with will be irrelevent unless it fully supports your working practises. Hays could give you a different contract but if the end user has full control over the work you do and the way that you do it, it would be useless in the event of an IR35 investigation by HMR&C.

[NotAllThere]

If your contract places you firmly in IR35, then HMRC will use that to determine you are liable - it's simply, quicker and cheaper for them. If your contract places you outside IR35. then they'll look to other routes as suggested above. So saying the contract is irrelevant isn't strictly true. If your contract is in IR35, then all bets are off immediately - never mind the working practices.

[Craig@Clarity]

If your contract places you firmly in IR35, then HMRC will use that to determine you are liable - it's simply, quicker and cheaper for them. If your contract places you outside IR35. then they'll look to other routes as suggested above. So saying the contract is irrelevant isn't strictly true. If your contract is in IR35, then all bets are off immediately - never mind the working practices.

They may think that it is quicker and cheaper but it would still remain irrelevant since no services are actually done or supplied to the agency but rather the end client. Past IR35 and status case law cannot be ignored. What will be assessed for IR35 if an agency is used is the hypothetical clauses in a hypothetical contract based on actual working practices.

[NotAllThere]

The point you make is that there is no sense in having an outside IR35 contract if the working practices are inside IR35. I don't think anyone would disagree with that. But that's a long way from "The contract between your limited company and your agency will have little relevance in determining your IR35 status". The way I see it:

• If your contract is outside IR35, and all (most) other factors are inside, then the contract is irrelevant. You're inside.
  
• If your contract is inside IR35, and all other factors are outside, then the other factors are considerably weakened, and you may be inside.

Or has there been a case where a contractor on an inside IR35 contract has actually been determined to be outside IR35 because of working practices?

[LisaContractorUmbrella]

The point you make is that there is no sense in having an outside IR35 contract if the working practices are inside IR35. I don't think anyone would disagree with that. But that's a long way from "The contract between your limited company and your agency will have little relevance in determining your IR35 status". The way I see it:

• If your contract is outside IR35, and all (most) other factors are inside, then the contract is irrelevant. You're inside.
  
• If your contract is inside IR35, and all other factors are outside, then the other factors are considerably weakened, and you may be inside.

Or has there been a case where a contractor on an inside IR35 contract has actually been determined to be outside IR35 because of working practices?

I doubt whether there would be case law supporting this as it is a situation that is unlikely to have arisen but I cannot see that working practises outside IR35 would be weakend by a contract written to be inside. In my opinion (and I am not a lawyer) it would be more likely to be the case that HMR&C would not rush to review your working practises if your contract stated you were inside and had not been paying the appropriate taxes because it would suit them to do it that way. If the case came to court it would be likely that the judge would take the wider view and you would be found to be outside.

[Craig@Clarity]

My opinion is based on the scenario where the contract is between the contractor's own limited company and the recruitment agency. In this situation the contract cannot be relied upon to determine the workers IR35 status since it is the working practices that will be assessed (hypothetical clauses and contract etc). If HMRC picked up the contract that is between the contractor's limited company and the agency, they will quickly see that the clauses (control, sub, MOO) have no relevance since the work is done at the end client. For example, how can they assess control between the contractor and the agency? They can't since the control issue lies between the contractor and the end client. That's why they base their assessments on working practices on site with the end client.

If the lower and upper contract don't mirror each other for IR35 clauses, how can the lower contract be relevant? The lower contract could be as IR35 friendly as you like with Right to Sub etc, but if the upper contract doesn't mention these clauses or contradicts them, it's again, down to what actually happens on site and the working relationship with the end client.

In the case where a contract is set up directly with the end client (no agencies involved), I would say the contract does become relevant as it should reflect the actual working conditions. However, HMRC would assess the contractor's status alongside the direct contract to see if any of the clauses are a 'genuine'.

[NotAllThere]

If we follow your opinion then, we shouldn't bother getting our contracts reviewed, wrt IR35.