IR35 Myths

[cojak]

Just had a rather alarming conversation with someone who has had advice from a client that is incorrect from a 'traditional' (pre 06/04/20) IR35 pov.

So - myth No.1:

No, just having multiple contracts does not make you free from IR35. Each contract must be viewed on it's own merits and the contract and your working practices once in contract must show at least one of the three pillars:

1. Right of Substitution (RoS)
2. a lack of mutuality of obligation (MOO)
3. a lack of Direction and Control (D&C)

This is what HMRC has to say about it

Someone is probably self-employed and shouldn’t be paid through PAYE if most of the following are true:
they’re in business for themselves, are responsible for the success or failure of their business and can make a loss or a profit
they can decide what work they do and when, where or how to do it
they can hire someone else to do the work
they’re responsible for fixing any unsatisfactory work in their own time
their employer agrees a fixed price for their work - it doesn’t depend on how long the job takes to finish
they use their own money to buy business assets, cover running costs, and provide tools and equipment for their work
they can work for more than one client

And notice the 'probably' bit. This applies to each contract - if you can work for multiple clients but can't decide in this contract what work, when, where or how you do it, then it’s probably inside IR35.


See here for more information: Employment status: Self-employed and contractor - GOV.UK

[jamesbrown]

Yup. It's also hardly surprising when you have news outlets like the DM propagating that myth.

[WordIsBond]

No, just having multiple contracts does not make you free from IR35. Each contract must be viewed on it's own merits and the contract and your working practices once in contract must show at least one of the three pillars:

Completely true. But to be fair, multiple concurrent contracts with different clients has been noted in case law as an indicator of 'being in business for yourself' as opposed to disguised employment.

If you have multiple concurrent contracts and you have any brain at all, you'll almost certainly have had many opportunities to beef up your IR35 dossier with examples of places where you weren't under Supervision/Direction/Control, or where you've taken financial risk, etc. It isn't close to being a silver bullet but it makes it a lot harder for HMRC to argue that you are employed.

[cojak]

But agents are using this as the sole reason for putting a contractor outside of IR35* and I think that many contractors will believe this to be the case.

(*Or more to the point, getting contractors to accept their contract.)

[cojak]

Thinking further though, how many agents will be happy knowing that they will only get a part of the contractor, not the whole 37.5 hours?

[ladymuck]

Thinking further though, how many agents will be happy knowing that they will only get a part of the contractor, not the whole 37.5 hours?

I had a fun argument with an agent along similar lines. There was a clause in the contract that said I couldn't work anywhere else for the duration of the contract. I refused to sign unless the clause was removed, siting that I often have multiple concurrent contracts and none of those demand such exclusivity. He then tried to say the clause only applied to the 40 hours a week I was expected to work. I argued that the contract didn't say that, it was worded quite clearly to the contrary.

I refused to sign, and it got to 3pm on the Friday (start on the Monday) and he cracked and removed it. He claimed the client had to approve the change but I know damn well he never even waved it past them.

He also claimed that an opted-in contract meant I was IR35 caught.

[Maslins]

Surely a key thing here is MOO and control over when you work. Eg two very different situations:

1) you work Mon/Tue/Wed for client A, Thu/Fri for client B. This is contractually agreed, and what you always do. Even though you have two clients, potentially with fairly even income, there is still MOO with both, and the clients control when you work.

2) you have agreements with client A and client B of a daily rate, and they'll call on you as/when they need help. Sometimes neither will want you on a given day. Other days both will want you, and you'll likely choose one. Here there's no MOO, and you control when you work.

I agree though that there is a myth believed by some that having 1% of their income from little side bits means the 99% of their income from their main client is suddenly immune to IR35. This is of course not true.

[northernladuk]

Surely a key thing here is MOO and control over when you work. Eg two very different situations:

1) you work Mon/Tue/Wed for client A, Thu/Fri for client B. This is contractually agreed, and what you always do. Even though you have two clients, potentially with fairly even income, there is still MOO with both, and the clients control when you work.

2) you have agreements with client A and client B of a daily rate, and they'll call on you as/when they need help. Sometimes neither will want you on a given day. Other days both will want you, and you'll likely choose one. Here there's no MOO, and you control when you work.

I agree though that there is a myth believed by some that having 1% of their income from little side bits means the 99% of their income from their main client is suddenly immune to IR35. This is of course not true.

Are you not falling in to another IR35 myth which is around what MoO actually is? It's the obligation to provide work AFTER the agreed assignment is over. It's not the obligation to provide work on a day by day basis. We are of course talking about a lack of MoO as there is some mutuality of obligation within a contract. Some fancy legalese but there are certain obligations. It's only after that piece of work is finished that MoO kicks in, or techinically not. A contract isn't obliged more work and they can do one. A permie expects a new piece of work to be given.

The flexibility around when you work is down to the T&M basis of our contracts. We get paid per day of work done. If the client doesn't offer work we don't get paid, if we are unavailable for work we don't get paid. Being sent home from clients for shut down periods or us going on holidays isn't, as some people think, anything to do with MoO.

[malvolio]

Are you not falling in to another IR35 myth which is around what MoO actually is? It's the obligation to provide work AFTER the agreed assignment is over. It's not the obligation to provide work on a day by day basis. We are of course talking about a lack of MoO as there is some mutuality of obligation within a contract. Some fancy legalese but there are certain obligations. It's only after that piece of work is finished that MoO kicks in, or techinically not. A contract isn't obliged more work and they can do one. A permie expects a new piece of work to be given.

The flexibility around when you work is down to the T&M basis of our contracts. We get paid per day of work done. If the client doesn't offer work we don't get paid, if we are unavailable for work we don't get paid. Being sent home from clients for shut down periods or us going on holidays isn't, as some people think, anything to do with MoO.

True but the test is "an irreduclible level of Mutuality of Obligation", not its absence (or presence). It is accepted that there is always some mutuality in any contract else there would be no reason to pay you or for you to do the work once paid.

But having to accept or offer work once the agreed contract has been fulfilled is, as you say, a killer to an IR35 defence.

[northernladuk]

True but the test is "an irreduclible level of Mutuality of Obligation", not its absence (or presence). It is accepted that there is always some mutuality in any contract else there would be no reason to pay you or for you to do the work once paid.

But having to accept or offer work once the agreed contract has been fulfilled is, as you say, a killer to an IR35 defence.

Yep... and now I've re-read Maslins posts I see the distinctions he was making with the time being a contractual factor and not the time off/furlough situation that so many people get wrong.

Interesting scenarios those though. We've not had time dictated in the contract discussions before so changes/impacts MoO in some way.