Substitution???

[headsy]

So my client has asked me to provide an MOU stating a specific Ltd company will provide a substitute for me and they are suitably SQEP to carry out my role.

I can do this but it just makes me think this client doesn't have a clue about the substitution part of IR35 and I think this won't make it through their legal team.

Anyone got their thoughts?

They haven't confirmed they will accept a substitute and if they do that and confirm surely the above is irrelevant anyway?

[BR14]

So my client has asked me to provide an MOU stating a specific Ltd company will provide a substitute for me and they are suitably SQEP to carry out my role.

I can do this but it just makes me think this client doesn't have a clue about the substitution part of IR35 and I think this won't make it through their legal team.

Anyone got their thoughts?

They haven't confirmed they will accept a substitute and if they do that and confirm surely the above is irrelevant anyway?

dunno, haven't SQEPped any MOUs lately.

[ladymuck]

A specific Ltd Co will supply the subs? Sounds suss

[jamesbrown]

Sounds like they don't understand substitution vs. subcontracting. Substitution is a narrow form of subcontracting in which YourCo remains responsible for everything, including invoicing, so the client wouldn't really know it was happening, unless the substitute had direct contact with the client or the contract fettered it. Anyway, it can't be a substitution if delivered by another company, independently.

[northernladuk]

To be fair I'd bet a vast majority of contractors don't understand the nuances of substitutes either.

[jamesbrown]

To be fair I'd bet a vast majority of contractors don't understand the nuances of substitutes either.

Aye, true.

Both of them are good w/r to IR35, but one is better than the other.

[WordIsBond]

They are looking for cover to give you an outside determination. It probably came from legal. Give them what they want, if you have a contractor mate who will do it.

[WordIsBond]

Anyway, it can't be a substitution if delivered by another company, independently.

They aren't asking to have a deal with another company. They want proof that OP has a real, qualified, experienced substitute, so that they can say, "Yes, we'll accept a substitute."

[jamesbrown]

They aren't asking to have a deal with another company. They want proof that OP has a real, qualified, experienced substitute, so that they can say, "Yes, we'll accept a substitute."

How do you know? I think you're making some heroic assumptions about what the contract may or may not say w/r to subcontracting/assignment/substitution. Bottom line, unless the contract agrees that OPCo can send anyone suitably qualified on behalf of OPCo and that the client cannot unreasonably withhold their consent, then it isn't a substitution, even if the contract allows for assignment or subcontracting. It would be better for the OP to have their own legal representative speaking to the client person to avoid any confusion, rather than assume that the client knows what they're doing. Substitution is a completely alien concept to most businesses. It's pure IR35 world.

[WordIsBond]

How do you know?

I don't KNOW. I'm speculating.

It's not groundless speculation. It comes at a time when clients have to make a determination. So it clearly is IR35 related. Someone knows enough to know substitution matters.

OP has no obligation to educate his client on the intricacies of substitution vs subcontracting. All he has to do is convince them to say they'll accept a substitute, and it's an outside determination. He doesn't have to use the sub, and if HMRC asks if they'll accept a sub they say yes, and trot out this piece of paper to say, "We've done our due diligence, he's got an agreement with a company that will provide a SQEP and we'll accept that."

HMRC says, "Ok," and goes to find a softer target.

They aren't asking to have a MOU with the sub company, they are asking him to provide one. So the MOU states that OP's Ltd will engage SQEP's Ltd to provide the services, and pay for them, in the event that OP needs or desires a substitute. Sorted.