Outsourcing advice

[eek]

I don't want to derail the thread, but to clarify the company have done the CEST scores whilst separately unofficially blanket banned contractors going forwards.

Not sure why there's a slightly hostile response!

I'd just like some advice whether going through an existing outsourcing company shifts the responsibility of IR35 determination and if this is above board.

NO it does NOT
As we stated in our first responses.

It is clear that your company wants employees and you've just discovered the first problem with that - those who are good enough and specialist enough to have options won't accept an inside IR35 contract as they don't need to.

And you can't create a fake framework to get around it - so as I said again in my post you are in the UK, the contractor is in the UK - HMRC will see through it, ignore the fake bit and would come after your company seeking maximum fines as creating a fake framework to avoid your responsibilities is definitely going to trigger HMRC seeking penalties and publicity to discourage others from doing the same.

[Paralytic]

They simply refer to the CEST tool and say we'd never accept a substitute, which puts the contractor inside IR35.

You can also tell them that this is downright wrong. CEST can be answered as follows:

3. Substitutes and helpers
Have you ever sent a substitute to do this work? No
Does your client have the right to reject a substitute? Yes
Have you paid another person to do a significant amount of this work? No

and still provide an "Off-payroll working rules (IR35) do not apply" result.

If I were in your position, I'd simply call out the detrimental impact the decision will have on the project/product (additional time/cost, lost revenue etc) and escalate as appropriate. It sounds like you're not at the level where you can realistically challenge the decision makers, so push that onto those that can.

And on the wider question, I agree that shifting the resource to the outsourcing company does not absolve the UK company from IR35.

However, if your contract with the outsourcing company is written is such a way that this individuals work can be delivered under a fixed set of deliverables/fixed price sort of SOW, then that could be an option. Whether that would be any easier to do that doing the same directly with him is something only you can answer.

[riskycl]

NO it does NOT
As we stated in our first responses.

It is clear that your company wants employees and you've just discovered the first problem with that - those who are good enough and specialist enough to have options won't accept an inside IR35 contract as they don't need to.

And you can't create a fake framework to get around it - so as I said again in my post you are in the UK, the contractor is in the UK - HMRC will see through it, ignore the fake bit and would come after your company seeking maximum fines as creating a fake framework to avoid your responsibilities is definitely going to trigger HMRC seeking penalties and publicity to discourage others from doing the same.

Ok, thank you for the large red font, only an idiot could miss that.


I am still struggling with the concept of outsourcing and the IR35 implications though. We need these services, so if we don't have a relationship with a contractor we will use an outsourcing company instead - it's now my only option if my company won't deal with contractors. We already do get occasional resources through outsourcing companies today and we've never questioned the employment status of the people they send to us. Do we now have to IR35 assess a software houses employees?

[riskycl]

You can also tell them that this is downright wrong. CEST can be answered as follows:



and still provide an "Off-payroll working rules (IR35) do not apply" result.

If I were in this position, I'd simply call out the detrimental impact the decision will have on the project/product (addition time/cost, lost revenue etc) and escalate as appropriate. It sounds like you're not at the level where you can realistically challenge the decision makers, so push that onto those that can.

Thank you for the constructive advice. I'll take another look at the CEST tool, from my memory I thought as soon as the client had the ability to reject a substitute it fell inside IR35.

[northernladuk]

Ok, thank you for the large red font, only an idiot could miss that.

Miss what?

I am still struggling with the concept of outsourcing and the IR35 implications though. We need these services, so if we don't have a relationship with a contractor we will use an outsourcing company instead - it's now my only option if my company won't deal with contractors. We already do get occasional resources through outsourcing companies today and we've never questioned the employment status of the people they send to us. Do we now have to IR35 assess a software houses employees?

Read my first response to you in the second post. Difference between supplying bodies or supplying services.

[eek]

Ok, thank you for the large red font, only an idiot could miss that.


I am still struggling with the concept of outsourcing and the IR35 implications though. We need these services, so if we don't have a relationship with a contractor we will use an outsourcing company instead - it's now my only option if my company won't deal with contractors. We already do get occasional resources through outsourcing companies today and we've never questioned the employment status of the people they send to us. Do we now have to IR35 assess a software houses employees?

I only did it because you clearly ignored my first post.

As for you last question, if you are purchase resources rather than fixed price pieces of work you may need to assess the people working on those projects.

I'll be blunt - blanket bans have cost my company a £300,000 piece of work because I didn't want to employ staff on a project (they in likelihood wouldn't be good enough) and the end client wanted no contractors on the project.

Instead they are now paying one of the larger firms £400,000 for it - not my problem.

So this is very much your problem - you need:-

1) use CEST to check whether the person should be outside (if not stop there as you are getting into HMRC making an example terriority)
2) your company then needs to remove the blanket ban

or

2b) you employ an outsourcer company to complete the task and say farewell to the contractor but you cannot move the contractor into an outsourcer and magically solve the problem - that doesn't work as you are still the end client and the one responsible for the determination.

[riskycl]

I only did it because you clearly ignored my first post.

As for you last question, if you are purchase resources rather than fixed price pieces of work you may need to assess the people working on those projects.

I'll be blunt - blanket bans have cost my company a £300,000 piece of work because I didn't want to employ staff on a project (they in likelihood wouldn't be good enough) and the end client wanted no contractors on the project.

Instead they are now paying one of the larger firms £400,000 for it - not my problem.

So this is very much your problem - you need:-

1) use CEST to check whether the person should be outside (if not stop there as you are getting into HMRC making an example terriority)
2) your company then needs to remove the blanket ban

or

2b) you employ an outsourcer company to complete the task and say farewell to the contractor but you cannot move the contractor into an outsourcer and magically solve the problem - that doesn't work as you are still the end client and the one responsible for the determination.

I agree this whole IR35 situation is potty and seems very disruptive to the economy.

Unfortunately for me, I think the CEST tool tends to return Inside IR35 in this case unless we accept substitutes, which my company say we would never agree to. And this individual won't work inside IR35 even if my company were open to keeping contractors on the books.

Therefore I think I am stuck with option 2b. Unfortunately this will cost more and give me worse quality, unless the contractor himself goes into the outsourcer which we're saying is not an option because of "avoidance". The irony is that we'll have no idea who the outsourcer sends, how good they are, or whether they are the same kind of PSC as our current contact!

I'm wondering whether we need to bundle this work into deliverables rather than a "time and materials" basis.

[riskycl]

Miss what?


Read my first response to you in the second post. Difference between supplying bodies or supplying services.

Do you know if HMRC give any examples of the two? It might help me to restructure the statement of work to supply a service rather than a person.

[eek]

I agree this whole IR35 situation is potty and seems very disruptive to the economy.

Unfortunately for me, I think the CEST tool tends to return Inside IR35 in this case unless we accept substitutes, which my company say we would never agree to. And this individual won't work inside IR35 even if my company were open to keeping contractors on the books.

Therefore I think I am stuck with option 2b. Unfortunately this will cost more and give me worse quality, unless the contractor himself goes into the outsourcer which we're saying is not an option because of "avoidance". The irony is that we'll have no idea who the outsourcer sends, how good they are, or whether they are the same kind of PSC as our current contact!

I'm wondering whether we need to bundle this work into deliverables rather than a "time and materials" basis.

If you wouldn't accept a substitute - then in all likelihood the contractor was always inside and only now the truth is being revealed.

[eek]

Do you know if HMRC give any examples of the two? It might help me to restructure the statement of work to supply a service rather than a person.

Why would they - the requirement is really that the contractor takes financial risk - i.e. will repair any faults at no additional cost..

The problem is that you need to break it down into constituent parts - which is actually something I need to do this week for GCloud reasons for the Dynamics 365 things we sell.