IR35 - Reviewed by 2 accountants

[jmo21]

In that scenario, you operate according to your contract (i.e. lack of D&C, and operate your RoS if applicable) and, if they don't like it, they'll can you. Ultimately, it all comes down to the working practices, otherwise it was a sham to begin with.

Indeed.

But what I meant is, there is absolutely no way to review your working practices until after you have started and been there X amount of time.

[aoxomoxoa]

Indeed.

But what I meant is, there is absolutely no way to review your working practices until after you have started and been there X amount of time.

And also, at the point it becomes clear that the actual working practices are inconsistent with the contract, your leverage to get client agreement to amendments to the contract has disappeared.

[DirtyDog]

Why? The BET's are a reasonable indicator. There is nothing set in stone with IR35 as we all know as, if status is tested, it will come down to the Judge's interpretation of the law but the tests do cover areas which have come up in previous cases e.g. unfettered ROS and do cover things that would definitely indicate that you are in business on your own account.

If you have an unfettered right of substitution, then you are outside IR35. Having a right of substitution scores 2 points on the business entity tests, which is almost meaningless. The two don't correlate.

I work from home, use my own equipment, work the hours that suits, have an unfettered right of substitution (and could line someone up part time at least to cover if necessary), have no direction or control, and there is no mutual obligation (when the system goes next year, that's the end, if not before). I scored 6 points on the business entity tests.

If my clients didn't pay me, so that I ran up bad debt, then that would be a good thing according to HMRC, though.

[LisaContractorUmbrella]

If you have an unfettered right of substitution, then you are outside IR35. Having a right of substitution scores 2 points on the business entity tests, which is almost meaningless. The two don't correlate.

I work from home, use my own equipment, work the hours that suits, have an unfettered right of substitution (and could line someone up part time at least to cover if necessary), have no direction or control, and there is no mutual obligation (when the system goes next year, that's the end, if not before). I scored 6 points on the business entity tests.

If my clients didn't pay me, so that I ran up bad debt, then that would be a good thing according to HMRC, though.

But you get 20 points if you have actually used a substitute - IR35 cases have failed because the ROS was there in theory but not in practice - the tests make that distinction. I don't think HMRC are saying it's a good thing to lose money (even they're not that callous.....possibly) but, if you think about it, an employee is guaranteed a salary from their employer, a businessman risks losing out financially due to bad debts.

I agree that the BET's are not as useful or helpful as they could have been (probably down to HMRC's natural bias) but I think they can be a useful indicator for someone just starting out

[jamesbrown]

Indeed.

But what I meant is, there is absolutely no way to review your working practices until after you have started and been there X amount of time.

As long as you operate according to your contract, it doesn't matter. Your working practices are just that, yours. I understand your question though and I suppose the best you can do is to get a confirmation of arrangements (using an appropriate person on the client side), so that any potential conflicts are probed in advance. Bottom line, though, your working practices are crucial and all the elements necessary for solid working practices should be embedded in the contract. However, I think there's an inherent problem when your business model/area of operation is a "bum on seat" scenario, rather than a business with unique skills being drafted in to implement a discrete project. In other words, you can be operating a business model that makes the scenario you mention highly unlikely.

[DirtyDog]

I agree that the BET's are not as useful or helpful as they could have been (probably down to HMRC's natural bias) but I think they can be a useful indicator for someone just starting out

I'm going to have to disagree again. I think that at best, they are a useful way for HMRC to get someone to declare themselves inside IR35 because they think they are a high risk.

In terms of actually determining your status (whether you are just starting out or not), they are irrelevant because of the way that they are scored. As with so much of IR35, it's about scaring people into paying unnecessary tax.

[LisaContractorUmbrella]

I'm going to have to disagree again. I think that at best, they are a useful way for HMRC to get someone to declare themselves inside IR35 because they think they are a high risk.

In terms of actually determining your status (whether you are just starting out or not), they are irrelevant because of the way that they are scored. As with so much of IR35, it's about scaring people into paying unnecessary tax.

We'll have to agree to disagree on this one

[VectraMan]

But you get 20 points if you have actually used a substitute - IR35 cases have failed because the ROS was there in theory but not in practice

It's hard to believe anybody ever substitutes in practice, unless you really are an unskilled temp. If you're selling your personal service and expertise, you can't very well say "Oh BTW, it might not be me doing the work". The fact contractors go through interviews kind of puts a hole right through the idea of substitution.

an employee is guaranteed a salary from their employer, a businessman risks losing out financially due to bad debts.

Contractors and permies alike can lose out financially if a company goes bust.

[SueEllen]

It's hard to believe anybody ever substitutes in practice, unless you really are an unskilled temp. If you're selling your personal service and expertise, you can't very well say "Oh BTW, it might not be me doing the work". The fact contractors go through interviews kind of puts a hole right through the idea of substitution.

I know people who have used substitutes and on the clients' premises as well.

[malvolio]

It's hard to believe anybody ever substitutes in practice, unless you really are an unskilled temp. If you're selling your personal service and expertise, you can't very well say "Oh BTW, it might not be me doing the work". The fact contractors go through interviews kind of puts a hole right through the idea of substitution.

But the point is that employees cannot substitute themselves, therefore a "reasonably unfettered" (which has its own specific meaning) right to offer a substitute demonstrates that you are not an employee and should not be regarded as one for taxation purposes.

As for "unskilled", I could swap jobs with Cojak and we would both deliver exactly the same result. I don't consider my 20-odd years of specific experience as "unskilled"; quite the opposite in fact.

Contractors and permies alike can lose out financially if a company goes bust.

But employees are a long way up the food chain for payment, behind the taxman and the liquidators, while contractors are at the very bottom.