Substitution advice

[Sally BFCA]

Plus, if it's a long term thing, it might provide too much turnover to put you out of the fixed rate scheme.

If you're referring to the VAT flat rate scheme, good point. The ceiling limit is £150,000 per annum.

[The Wikir Man]

If you're referring to the VAT flat rate scheme, good point. The ceiling limit is £150,000 per annum.

Yep - that's what I meant.

[ChimpMaster]

If you're referring to the VAT flat rate scheme, good point. The ceiling limit is £150,000 per annum.

What happens if you're on the fixed rate but end up billing > £150k for the year?

[The Wikir Man]

What happens if you're on the fixed rate but end up billing > £150k for the year?

You come out of FRS and have to calculate your input and output VAT as normal.

[Sally BFCA]

You come out of FRS and have to calculate your input and output VAT as normal.

As ChimpMaster correctly pointed out in another thread once you are on the flat rate scheme, you can remain on it until your turnover reaches £225,000.

The £150,000 (estimated) is turnover to apply for the flat rate scheme.

[sheik yerbouti]

Wow! Many thanks for all the responses!

To clear up some of the queries :

- I am not registered for Vat, nad even if I went back to work elsewhere would not go above the FRS threshold.

- I have an unfettered right to substitute myself with another person of similar skills. I would be willing to stay in the position gratis for a week or two whilst they got up to speed.

- Whilst I have not seen the full contract between the client and the agency, I have seen the extension approval which states "An individual to supply IT services" - my name is not mentioned.

- I understand what people mean regarding the client not co-operating, but I cannot break my business to business agreement, and neither can they. To give a background, I tried to leave within the 3rd month of my initial contract and was told by the client "I will enforce it" - the agency then threatened to sue me. Long story, but I ended up invoking my right of substitution at that time and even went as far as interviewing a substitute, who I put forward to the agency. In the end I stayed in the contract, but the right has already been proven.

My question really, is "would I have a right to sue for breach of contract if the agency or client refused to allow a substitute"?

[jmo21]

- I understand what people mean regarding the client not co-operating, but I cannot break my business to business agreement, and neither can they. To give a background, I tried to leave within the 3rd month of my initial contract and was told by the client "I will enforce it" - the agency then threatened to sue me. Long story, but I ended up invoking my right of substitution at that time and even went as far as interviewing a substitute, who I put forward to the agency. In the end I stayed in the contract, but the right has already been proven.

My question really, is "would I have a right to sue for breach of contract if the agency or client refused to allow a substitute"?

We need to see what your contract says.

How exactly did you try to leave? if there is "no notice period" on your side, that is why the client "threatened" you. IMHO this surprises me, what's the point really, who wants an unhappy worker on site.

As for them, I am positive that there is a clause in your contract that says they can give you X weeks notice to leave, and they won't have to give a reason.

And because of this, they can get round your "right to substitution" clause.

So again, IMHO I think in most cases, a right of substitution clause is meaningless in a contract.

[centurian]

All this makes assumptions based upon your contract - which obviously we haven't seen.

but I cannot break my business to business agreement, and neither can they.

They don't need to. They can (probably) issue you with contractual notice without giving you a reason. But the real killer is that they don't need to supply you with work on a day-to-day basis or pay you for it (if they do, you're IR35 screwed anyway).

So essentially they can say - "here's x days notice and we have nothing for you to do between now and then, so basically foxtrot oscar and don't even think about trying to invoice for it" - all perfectly valid within the contract (assuming your contract is similar to 95%+ of contractors).

My question really, is "would I have a right to sue for breach of contract if the agency or client refused to allow a substitute"?

Yes, subject to exact clauses around "cannot unreasonably refuse" etc.

However as mentioned above, all they need to is say "we accept your substitute, however we have no work for them to do, goodbye".

Personally, I would say that if you do think about suing them, make sure you buy a lottery ticket as well - as least you'll have a chance of something working out.

[The Wikir Man]

- I am not registered for Vat, nad even if I went back to work elsewhere would not go above the FRS threshold.

VAT registration threshold is £70k turnover. So, if you go get another contract that brings in £36k or more, and you have a substitute where your bill to the client is £34k or more, then you need to register for VAT as you'll be over the threshold.

- I understand what people mean regarding the client not co-operating, but I cannot break my business to business agreement, and neither can they. To give a background, I tried to leave within the 3rd month of my initial contract and was told by the client "I will enforce it" - the agency then threatened to sue me.

They can get rid of you in accordance with the contract. So, unless you have a contract that they cannot terminate, they can still effectively refuse your substitute, They just accept the substitute, and then immediately terminate the contract, paying you nothing for the notice period.

Long story, but I ended up invoking my right of substitution at that time and even went as far as interviewing a substitute, who I put forward to the agency. In the end I stayed in the contract, but the right has already been proven.

So, you didn't invoke your right of substitution - you started to and then stayed yourself. Just because they were willing to consider a candidate at one point in time does not mean that they will consider it again. Not knowing what your contract says, you aren't going to get any definitive advice here - we don't know what rights of termination either party has, and we don't know what rights of substitution you actually have.

My question really, is "would I have a right to sue for breach of contract if the agency or client refused to allow a substitute"?

If they breach the contract, then you could sue for breach of contract. Not entirely sure exactly what you would get from that though, to be honest. Damages would need to be proportionate to the loss of income from their breach. So, if you stay there instead of taking a better paying role elsewhere, limited to the difference between the two contract values; if you leave and don't take any further work, limited to the loss of value of the rest of the contract. Minus your legal fees, hassle, and (depending on how niche your market is) the potential impact on future work opportunities. You'd also need to take proper legal advice whether the breach was a breach of warranty or a breach of conditions, to determine whether it is serious enough to be able to terminate the contract.

If they don't breach the contract, then you can't sue for breach of contract. Before threatening any legal action, make sure you are certain about whether the contract has been breached, and what your best line of compensation is.

Additionally, as I said in the second post, if you attempt to make a substitution, and the client refuses, this would also help point to you being inside IR35. If HMRC come calling and that turns out to be the crucial piece of evidence against you, I hope that the compensation you get from suing makes it worthwhile.

[centurian]

Additionally, as I said in the second post, if you attempt to make a substitution, and the client refuses, this would also help point to you being inside IR35.

That is an important point because it could end up costing 1000s.

You can always argue an unused ROS clause as being perfectly executable. A rejected ROS leaves you "holed beneath the waterline".