Working Practices pass, but contract is a fail

[The Spartan]

Hey everyone

It's good to be back

I've recently had a 12 month extension offered for the current gig, unfortunately the agency have changed their contract since the beginning of the year to accommodate HMRC's intermediaries legislation. The contract failed a full QDOS IR35 review but my working practices are a pass, has anyone on here been in a similar position? I'm inclined not to take it unless the contract is amended but it would be good to know others thoughts on the subject.

[northernladuk]

What exactly did it fail on and have you spoken to the agency yet? It's not a good position to be in having a IR35 unfriendly contract so they may be willing to listen. They may not even know it's failed???

[TheFaQQer]

The working practices are the important thing, and that's what HMRC would use to determine the reality of the contract rather than just the wording of the paper.

However, I'd think that the defence becomes a lot harder to fight if HMRC can wave a bit of paper around and say "but this is the contract" - based on my assumption that they will use whatever the flimsiest piece of evidence there is to clobber you.

I'd certainly want professional advisers available to me, whether that's in the form of Qdos or AbbeyTax or someone else - and if you have that available, it's probably worth ringing them and asking what they advise.

[The Spartan]

What exactly did it fail on and have you spoken to the agency yet? It's not a good position to be in having a IR35 unfriendly contract so they may be willing to listen. They may not even know it's failed???

Hey NLUK it failed on D&C and RoS, I've relayed all this back to the agency with the necessary amendments but they seem unwilling to budge at the moment. The strange thing in all this is that they amended the initial contract before I accepted it. I've never had this much trouble with an extension before as it's usually the same as the initial contract. It seems to me they've got the wrong end of the stick with HMRC's new legislation as well with regards to a declaration at the end of the contract:

In relation to the agency legislation (Chapter 7, Part 2 Income Tax (Earnings and Pensions) Act 2003) (also
known as the Onshore Intermediary legislation), on behalf of <The Company> I declare:
That all individual(s) supplied by <The Company> and <ROA> (known as PSC) is/are
owners/directors and shareholders of the company (such shareholding is more than 5%);
That the PSC will provide such evidence as required by <The Recruitment Company> that any
individuals supplied by the PSC are shareholders or directors;
That, in order to benefit from the transfer of liability provision set out in section 44(4)(b) of the Income
Tax (Earnings and Pensions) Act 2003, any remuneration payable by the PSC to any individuals supplied
by it is treated by the PSC as employment income;
That, any other payments (which do not amount to remuneration) made by the PSC to any individuals
supplied by it are treated as dividend income as a genuine consequence of that individual's
shareholding in the PSC;
That the PSC is VAT registered;
That if the PSC is VAT registered I will provide a copy of the VAT Registration Certificate;
That the PSC is not an Offshore Company.
Should the PSC fail to meet the above criteria, then the PSC will be unable to provide their service to the <Recruitment company>

[The Spartan]

The working practices are the important thing, and that's what HMRC would use to determine the reality of the contract rather than just the wording of the paper.

However, I'd think that the defence becomes a lot harder to fight if HMRC can wave a bit of paper around and say "but this is the contract" - based on my assumption that they will use whatever the flimsiest piece of evidence there is to clobber you.

I'd certainly want professional advisers available to me, whether that's in the form of Qdos or AbbeyTax or someone else - and if you have that available, it's probably worth ringing them and asking what they advise.

I've spoken to QDOS and they're of the same sort of opinion as the working practices are sound but the contract isn't, it kind of confirms what I thought basically it's a no-go.

[northernladuk]

Won't QDOS speak to them on your behalf? Surely they realise the impact of having a contract that fails IR35. Word will get around very quickly. Seems a very poor carry on from them.

[The Spartan]

Won't QDOS speak to them on your behalf? Surely they realise the impact of having a contract that fails IR35. Word will get around very quickly. Seems a very poor carry on from them.

Hopefully they'll get to speak to the Organ grinder and not the Monkey, as I'm not sure if they realise how serious it is

[northernladuk]

Keep us informed. Am wondering if this is going to be the first of many or just one outfit that's got it wrong.

[The Spartan]

Keep us informed. Am wondering if this is going to be the first of many or just one outfit that's got it wrong.

My guess is that they've just got it wrong, I saw on another thread that Harvey Nash's standard contract passed as IR35 review without any problems.

[psychocandy]

Agency getting wrong end of the stick and sticking crap in their contracts and not giving a monkeys. Sounds familiar :-)

Good luck spartie. Surely you're in the position of power here though? You've been there a while, client wants you to stay, agency trying to change the status quo. Can't imagine client would be overpleased if you said sorry, agency are trying to change things, I'd have been happy to stay otherwise.