Can the substitute be billed at a lower rate?

[LisaContractorUmbrella]

This sub stuff is great and we never get chance to discuss it but I think the alarm bells are going here.

Your sub well, kind subs you. But in this case he is doing a different piece of work, somewhere client direction has crept in here. Different piece of work, different rate. In the eyes of HMRC this is NOT your sub. It is your client getting a different piece of work done by a different person at a different rate. If not that it is client direction and your contract as you are not honouring rate either.

Interesting one this.

What are you doing while your sub is working YAB?

But if the OP is paying the sub and has recruited the sub to do the work I can't really see what HMR&C's objection would be

[northernladuk]

But if the OP is paying the sub and has recruited the sub to do the work I can't really see what HMR&C's objection would be

The objection is he is not a sub. He is billed at a different rate and doing a different piece of work than that detailed in the contract. This can mean one of two things surely... client direction or he isn't a sub of that contract.

Are you saying what does it matter if he is a direct sub or not? I guess that is true but doing work not contracted is not a good place to be surely?

[rd409]

This sub stuff is great and we never get chance to discuss it but I think the alarm bells are going here.

Your sub well, kind subs you. But in this case he is doing a different piece of work, somewhere client direction has crept in here. Different piece of work, different rate. In the eyes of HMRC this is NOT your sub. It is your client getting a different piece of work done by a different person at a different rate. If not that it is client direction and your contract as you are not honouring rate either.

Interesting one this.

What are you doing while your sub is working YAB?

Is just negotiating an early end to your contract and get one set up with your sub not an option. Sounds like the option I would go for at the moment.

It's all playing with words I guess. Can you not call your sub - "sub" and call him "helper"? You don't have to be around him while he is helping you out on the project. As for the IR35 benefits, I guess helpers have the same effect as sub IMHO.

Dave.

[northernladuk]

It's all playing with words I guess. Can you not call your sub - "sub" and call him "helper"? You don't have to be around him while he is helping you out on the project. As for the IR35 benefits, I guess helpers have the same effect as sub IMHO.

Dave.

The helper is an interesting suggestion. Hadn't thought of that. I just think HMRC will look at the uber details of a situation like this so I think worth thinking about it at that level rather than just say 'Yeah fill your boots'

[LisaContractorUmbrella]

The objection is he is not a sub. He is billed at a different rate and doing a different piece of work than that detailed in the contract. This can mean one of two things surely... client direction or he isn't a sub of that contract.

Are you saying what does it matter if he is a direct sub or not? I guess that is true but doing work not contracted is not a good place to be surely?

I think it could be viewed positively by HMR&C depending on the circumstances - they want everyone to act like a business - in this instance the original contract is maintained with additional work being requested by clientco. The OP has satisfied that demand by providing a member of staff to carry out the extra work, provided that he/she is still under the original contract and has not been replaced by the sub I can't see the problem. Obviously, as with everything HMR&C related, the devil will be in the details but as long as the sub is employed by the OP and under their direction in terms of being given a piece of work to do I think they'd be ok

[Clare@InTouch]

Thinking of it from a builder's point of view then there's two ways to go:

If you hire a company to build a wall you agree a price for the job, and if they send a little helper in to do it for them that doesn't lower the price and you don't expect it to. A price is a price when you're talking about a fixed job.

OR

If you hire a company to demolish your garden you may get a bill at the end that has varying levels of fees for the workers involved - labourer at £10, site manager at £50 etc. It doesn't change the fact that you hired the company, not the individuals directly. You wanted a job done and it was done, you don't care that different people did different parts at different rates - you're interested in the end result.

With that logic it doesn't seem an issue as far as IR35 goes. That's not to say HMRC wouldn't argue it of course, but I can see how it could be countered.

[Gentile]

The objection is he is not a sub. He is billed at a different rate and doing a different piece of work than that detailed in the contract. This can mean one of two things surely... client direction or he isn't a sub of that contract.

WHS

[rd409]

Thinking of it from a builder's point of view then there's two ways to go:

If you hire a company to build a wall you agree a price for the job, and if they send a little helper in to do it for them that doesn't lower the price and you don't expect it to. A price is a price when you're talking about a fixed job.

OR

If you hire a company to demolish your garden you may get a bill at the end that has varying levels of fees for the workers involved - labourer at £10, site manager at £50 etc. It doesn't change the fact that you hired the company, not the individuals directly. You wanted a job done and it was done, you don't care that different people did different parts at different rates - you're interested in the end result.

With that logic it doesn't seem an issue as far as IR35 goes. That's not to say HMRC wouldn't argue it of course, but I can see how it could be countered.

Slightly different analogy. You hire a building company to build a wall, and they provide a quotation. The builder wishes to hire a sub to finish off that task.

• If you pay less, then this is not substitution
• If you pay the same rate, because the work is done this is full substitution.
• If you pay the same rate, but then deduct money for substandard work, that is full substitution as well.
• If you ask for an additional task to be done, and pay it at a different rate, then there is no substitution, but the builder has just hired a helper to get more work from the client.

I don't really know what OP's situation is, but it might be very complicated.

Dave.

[northernladuk]

Not to labour a point here but I think it is key. The sub is doing a different piece of work. This seems to get glossed over but to me is the bit that breaks the whole scenario.

[BlasterBates]

Even if the work is going to be slightly different, the fact that a sub was sent in I believe would be a major plus point.

Having read up on court cases on IR35 I've never seen the case where the "substitue" was argued as not being a substitute because he did slightly different activities, and the fact that you're billing for the work someone else is doing is major pointer to being in business on your own account.

The point about IR35 is to demonstrate that you are different from the permies, and certainly a permie wouldn't be able to send someone in and charge for him.

It has been argued in court that the fact that it would be difficult for a substitute to come in and replace a contractor would not be a negative pointer rather as it would reflect the commercial situation that skill is rare, if I remember correctly. Therefore I think the fact that substitute came in on the project and was given slightly different activities a reflection of the realities of the commercial situation. In the end the client would still be making use of a resource that moves the project on.