IR35 review fail and updates to contract based on review

[TheFaQQer]

Q1) Do the panel think that an insurance product a contractor has bought to mitigate IR35 (ipse, qdos or via accountancy fees etc) would still be valid if the contractor knew it had failed a review?

If the "insurance" is for representation only, then I would expect them all to cover the situation - it might be a pretty cheap investigation, after all.

If the "insurance" is for liabilities as well then that would be an interesting one to argue with Qdos / AbbeyTax / AN Other. I would be inclined to think not because you knew that there was a more significant risk of losing the case - if they always paid out then the premiums would be a lot higher, but so would their customer base. If you could claim on the insurance for everything even if you suspected you were inside IR35 then everyone would have the insurance, and no-one would ever declare themselves inside IR35.

Q2) Given the contract failed a review, do the panel think that HMRC would impose fines on top of the tax owed if it were deemed to be IR35 caught in an investigation.

I'm not aware of any fines being applied - I know that they are possible, but it's harder for HMRC to prove that they should apply. HMRC have always argued that it's the implied contract rather than the paper one which is important, so the contractor should be able to rely on that same argument. Just because the paperwork implied (in the eyes of one person) that the contract might be inside IR35, the working practices were always expected to be outside IR35 - prove otherwise, Hector.

[northernladuk]

Thanks, appreciate the answer. Can you give a heads up on what the "MOO & S,D,C" stand for? Also, do you have any advice/examples you've used maybe of "more relaxed" text I could throw back and ask them to add?

Thanks again, really appreciate answer.

I don't want to be rude but if you are in a situation where you may have to take a gig that has failed the IR35 test surely not knowing what the basic acronyms for the major IR35 flags is not really the best start. You have to make a decision base on the details of the situation and the amount of risk you are exposing yourself to and not knowing the basic acronyms is a bit of a red flag for that decision process surely?

I'd be a little worried you are looking for stuff to throw in just to tick the box rather than understand your situation which is far from ideal. That said QDOS normally provide alternative text for the contract to pass, did they not do that?

Whatever you put in the contract remember the working practices will trump it so just adding any old rubbish in to get a pass that isn't representative of what the customer will do is a waste of time. Sometimes the terms are what they are and you just have to make the decision to accept or walk.

[northernladuk]

The current position on IR35 (which is why you would put something like this in the contract) hasn't changed, and HMRC have confirmed that it will not change before 2017 at the earliest.

On that basis, I would ensure that there is a clear unfettered right of substitution and an explicit lack of MOO in the contract, and a more relaxed S, D AND C working practice than the clause that you have tried to include.

So on that basis, I would accept the contract without the attempt to get no S, D or C involved.

I was under the impression this is no longer a major pointer. Kate Cottrell said as much in an article I posted awhile ago.

Ah here it is... Note the last line...

IT contractors warned on IR35 substitution clauses :: Contractor UK

"On the basis that most substitution clauses are unreasonably fettered and do not work, I would recommend concentrating on the control issues in the contract which is the most important status issue."

[TheFaQQer]

I was under the impression this is no longer a major pointer. Kate Cottrell said as much in an article I posted awhile ago.

Ah here it is... Note the last line...

IT contractors warned on IR35 substitution clauses :: Contractor UK

If you have an unfettered right of substitution then it has to be an indicator of self-employment - what she said was that in many cases they aren't unfettered and don't work.

IR35 has always required HMRC to prove all three pointers.

[Contreras]

If the "insurance" is for representation only, then I would expect them all to cover the situation - it might be a pretty cheap investigation, after all.

I used to think that insurance for representation would cover you for the representation aspect whatever. Apparently however that is not so. If your "representation" take a view that the case is a loser then their fees would not be covered and you are on your own after all. Another reason why I (currently) choose to self-insure.

[OnceStonedRose]

I don't want to be rude but if you are in a situation where you may have to take a gig that has failed the IR35 test surely not knowing what the basic acronyms for the major IR35 flags is not really the best start. You have to make a decision base on the details of the situation and the amount of risk you are exposing yourself to and not knowing the basic acronyms is a bit of a red flag for that decision process surely?

I'd be a little worried you are looking for stuff to throw in just to tick the box rather than understand your situation which is far from ideal. That said QDOS normally provide alternative text for the contract to pass, did they not do that?

Whatever you put in the contract remember the working practices will trump it so just adding any old rubbish in to get a pass that isn't representative of what the customer will do is a waste of time. Sometimes the terms are what they are and you just have to make the decision to accept or walk.

Just so I'm clear, one of the underlying requirements in your eyes, albeit inferred, of a persons ability/suitability to undertake software development or consultancy is the knowledge of acronyms used on Internet forums? YCNMIU.

Flipping heck. I'm glad I don't have to sit in an office with you lad.

[SueEllen]

I used to think that insurance for representation would cover you for the representation aspect whatever. Apparently however that is not so. If your "representation" take a view that the case is a loser then their fees would not be covered and you are on your own after all. Another reason why I (currently) choose to self-insure.

IPSE+ membership is not insurance but their membership covers includes Jury duty cover, life assurance, legal helpline, and a few random other things. So for those things I may as well buy it.

BTW all good solicitors and barristers who care about their reputation should refuse to represent you if they don't think you have a winnable case regardless how they are paid. Obviously the reality is some are just money grabbing.

[PerfectStorm]

I used to think that insurance for representation would cover you for the representation aspect whatever. Apparently however that is not so. If your "representation" take a view that the case is a loser then their fees would not be covered and you are on your own after all. Another reason why I (currently) choose to self-insure.

Ah, so it that why IPSE claim they've never lost a case - because they don't take on the "bang to rights" ones?

[SueEllen]

Ah, so it that why IPSE claim they've never lost a case - because they don't take on the "bang to rights" ones?

Why would you as solicitor take on a case where the contractor hasn't done a basic IR35 check and got a decent contract? It would be a waste of your time.

[northernladuk]

Just so I'm clear, one of the underlying requirements in your eyes, albeit inferred, of a persons ability/suitability to undertake software development or consultancy is the knowledge of acronyms used on Internet forums? YCNMIU.

Flipping heck. I'm glad I don't have to sit in an office with you lad.

Your job is a contractor. The crap you do at a client is the easy stuff. You are a business selling skills you already have and knowing all the legislation around how you get that business. The skills of a good contractor is knowing about being a contractor not a coder. Permies can do that. Anyone that thinks contracting is just doing what the client wants is a disguised permie.