sub-contracting / IR35 implications

[Geocontract]

Hi, I was wondering if anyone could provide me with some advise.

I have been offered a second contract role. I was wondering if I could sub-contract this job (if the client agrees) at a mark up rate.


What would happen if the contract that I sign with my limited company was later found to be inside IR35? could I end up with a significant liability?

Thanks

[jamesbrown]

I'm not exactly clear what you're asking, but IR35 applies to each contract separately. Any liability on the new (or existing) contract should be viewed separately from your ability to subcontract on the existing (or new) contract. If you manage to successfully subcontract or, better, substitute for the existing (or new) contract, that would (almost certainly) place that contract squarely outside IR35. Note that there is a difference between subcontracting and substitution; both are positive for IR35, but substitution is definitive because you're sending someone as a direct substitute for your skills, to be paid via your company, and thus a requirement for personal service demonstrably does not apply. The new contract may be inside or outside IR35. If you're working several contracts and subcontracting some work, this is circumstantial evidence that you're in business on your own account but, ultimately, each contract is treated separately w/r to RoS, lack of MoO and lack of D&C. There is no potential liability on your company (w/r to IR35) on work that is done by the subcontractor.

[BlasterBates]

Subcontracting is a strong pointer to being a business. If you pass the "real business" tests they're far less likely to scrutinise any contract as you would be classified as low risk.

This a good thing to do to be outside IR35.

But I see the point if the sub-contractor you employ is inside IR35, whether you have a risk as well.

I would take advice on that.

[LisaContractorUmbrella]

If the sub-contractor was working through their own limited company I can't see that there would be an issue

[TheFaQQer]

If the sub-contractor was working through their own limited company I can't see that there would be an issue

This.

If they are working through an umbrella then obviously that's not an issue. If they were working for your company as an employee then obviously it's not an issue. If they were working through their own company as a sub-contractor, then if they failed IR35 the additional tax (assuming they declared themselves inside IR35) would be between them and their limited company, nothing to do with yours.

[northernladuk]

Hi, I was wondering if anyone could provide me with some advice.

[aoxomoxoa]

Ah yes, the NLUK "value add post of the day". A bit like this one really

[Craig@Clarity]

If you're working several contracts and subcontracting some work, this is circumstantial evidence that you're in business on your own account but, ultimately, each contract is treated separately w/r to RoS, lack of MoO and lack of D&C.

To just clarify on this point that trying to demonstrate being in business on your own account isn't going to help or win an IR35 case at Tribunal. However, as you correctly point out, it's the 'holy trinity' that you need to look at to determine your employment status.

Thumbs up on the good understanding though

[LisaContractorUmbrella]

To just clarify on this point that trying to demonstrate being in business on your own account isn't going to help or win an IR35 case at Tribunal. However, as you correctly point out, it's the 'holy trinity' that you need to look at to determine your employment status.

Thumbs up on the good understanding though

I think that if you were working several contracts and had subcontractors working for you on all of them being outside IR35 would be a pretty safe bet

[Craig@Clarity]

I think that if you were working several contracts and had subcontractors working for you on all of them being outside IR35 would be a pretty safe bet

Definitely. As soon as you sub, you demonstrate that there is a lack of requirement for your personal service. My point really was that being in business on your own account is irrelevant if you're trying to prove you're not employed at Tribunal. As you know, it all comes down to case law and the RMC case.