Contract has been retrospectively declared inside IR35

[krytonsheep]

I'm not sure how that works but I'm not on a 'rate' as such. The end client may be paying a daily rate to the consultancy but the consultancy pays my company lump sums based on deliverables.

For each deliverable, do you go through it with the client at the end, which they sign off on, so you can invoice? If you estimate/quote 5 weeks work for a deliverable and it takes 10 weeks, do you still invoice for 5 weeks?

I'm lost as to what is happening, especially since you're having to do timesheets. If it turns out the consultancy is charging the end client a daily rate, then the whole deliverables thing sounds bizarre.

At the time some suppliers were deemed inside and some were outside.

Another area I'm lost on. It's my understanding IR35 is applied on a per contract basis, not a per supplier basis.

[eek]

For each deliverable, do you go through it with the client at the end, which they sign off on, so you can invoice? If you estimate/quote 5 weeks work for a deliverable and it takes 10 weeks, do you still invoice for 5 weeks?

I'm lost as to what is happening, especially since you're having to do timesheets. If it turns out the consultancy is charging the end client a daily rate, then the whole deliverables thing sounds bizarre.


Another area I'm lost on. It's my understanding IR35 is applied on a per contract basis, not a per supplier basis.

I'm not - we saw another example over the weekend where what was clearly a time and material contract had been sold by the consultancy as something else.

I'm starting to think that we are going to see a few contracts with timesheets (as an incidental extra) where the last SoW deliverable isn't "accepted" by the consultancy as they pocket the money.

[northernladuk]

I'm lost as to what is happening, especially since you're having to do timesheets. If it turns out the consultancy is charging the end client a daily rate, then the whole deliverables thing sounds bizarre.

Sounds like a rather convoluted attempt to look like a SOW on deliverables but really is just an attempt to fumble around the rules and isn't actually the case on the ground. I think we will see (and we have already) a lot more of these that are SOW contracts with daily timesheets or other strange ways to look like something it isn't.

[SussexSeagull]

Was there any warranty period for the deliverable?

[BigDataPro]

I guess most of the contracts would come around to this pattern.

1. Agree X day rate, Deliverables and Optionally a time frame
2. Agree to withhold Y% until deliverables are met
3. Either pay that Y% at the end of contracting assignment (or) Disagree/Argue that the deliverables were met and don't pay

[ComplianceLady]

The move to SOW but with a day rate is definitely happening more. Doesn't matter how many times I explain it doesn't actually help for IR35 status clients think it's a good option. We have 2 types of SOW - true SOW with payment on deliverables which inevitably cause issues because the nature of the work is not generally easy to break up in this way plus the clients really want a day rate contractor but are trying to shoehorn this approach in. The other option we see a lot is SOW i.e. the work is scoped on with deliverables but payment is on a T&M basis. I see it direct with clients so not sure the whether consultancy doing it is indicative of a trend there or not.

[LondonManc]

What is the expenses policy of the contract with the end client? Would you fall under that if you moved under an inside IR35 contract? Could be worth checking with the consultancy?

[jamesbrown]

The move to SOW but with a day rate is definitely happening more. Doesn't matter how many times I explain it doesn't actually help for IR35 status clients think it's a good option. We have 2 types of SOW - true SOW with payment on deliverables which inevitably cause issues because the nature of the work is not generally easy to break up in this way plus the clients really want a day rate contractor but are trying to shoehorn this approach in. The other option we see a lot is SOW i.e. the work is scoped on with deliverables but payment is on a T&M basis. I see it direct with clients so not sure the whether consultancy doing it is indicative of a trend there or not.

Terms of service and terms of payment are two completely different things. The point of a SoW is to clarify what services will be provided (and, by implication, what services will not be provided), whether those services can be quantified upfront and attached to fixed payments or not. Any contract that lacks D&C will have a clear SoW. I have never worked a contract, whether T&M or fixed price, that did not have a clear SoW. In terms of payments, fixed price on deliverables has a bearing on IR35 only insofar as it is indicative of risk. Working without a SoW definitely has a bearing on IR35, regardless of payment terms. Obviously, a contract with a SoW is not necessarily a fixed price contract, but any fixed price contract will always have a SoW.

[ComplianceLady]

Terms of service and terms of payment are two completely different things. The point of a SoW is to clarify what services will be provided (and, by implication, what services will not be provided), whether those services can be quantified upfront and attached to fixed payments or not. Any contract that lacks D&C will have a clear SoW. I have never worked a contract, whether T&M or fixed price, that did not have a clear SoW. In terms of payments, fixed price on deliverables has a bearing on IR35 only insofar as it is indicative of risk. Working without a SoW definitely has a bearing on IR35, regardless of payment terms. Obviously, a contract with a SoW is not necessarily a fixed price contract, but any fixed price contract will always have a SoW.

Yes what I was getting at is that clients think adding an extra piece of paper to the contract with 'Statement of Work' and a list of deliverables 'fixes' IR35. It doesn't. Properly scoping the contract to enable a lack of direction and control does but this isn't what clients generally are doing. We have many contractors delivering work on an outside IR35 basis without a SOW in the contract - it actually becomes unhelpful as clients think they've added a bit of detail and therefore 'fixed' IR35. Clients who engage in the discussion initially about how to engage a contractor on an outside basis understand that the way they work day to day is important. For me, that is preferable.

[jamesbrown]

Yes what I was getting at is that clients think adding an extra piece of paper to the contract with 'Statement of Work' and a list of deliverables 'fixes' IR35. It doesn't. Properly scoping the contract to enable a lack of direction and control does but this isn't what clients generally are doing. We have many contractors delivering work on an outside IR35 basis without a SOW in the contract - it actually becomes unhelpful as clients think they've added a bit of detail and therefore 'fixed' IR35. Clients who engage in the discussion initially about how to engage a contractor on an outside basis understand that the way they work day to day is important. For me, that is preferable.

Sure, a sham is always a sham, whether it relates to a SoW or anything else. Bottom line, if you don't have a SoW in your contract (regardless of payment terms), then either your contract is unlikely to be outside of IR35 or it doesn't reflect the working practices. If the working practices involve delivering services at the whim of the client, day to day, then you won't be able to show (lack of) D&C, which is then very bad in terms of IR35.