Inside Determination based on CEST

[eek]

Thanks for that I do think that's the stronger basis for appeal too, but I'll be raising both points in the appeal if I can.

I don't think it does - in your first post it says you need a new contract were you to work for a different end client.

What happens if the current client asked you to work on a different project for a few days or doing something on your current project which is outside what you believe the scope is. Would that require a new agreement?

[Paralytic]

There is a whopping difference between - substitute can be rejected by client and client saying they won't accept a substitute.

One says that if I produce a substitute (that is say the ex-partner of a staff member) the client has (the quite reasonable) ability to reject, the other says the client will reject all substitutes (even one more than qualified).

Now the former is perfectly understandable and as a consultancy you would just swap them for someone else, the latter basically says they have purchased your time.

But CEST doesn't ask if the client would accept a substitute. It asks if a substitute has been used, and whether the client have the right to reject a substitute. Answering No/Yes can still lead to an outside result.

Of course, if, during an investigation, the client says they would not accept a substitute, then that is significant and HMRC would just (attempt to) ignore CEST. But, in the post I responded to, the OPs HR department said CEST always gives an Inside IR35 determination based on "negative" answers to the substitution questions. That is patently not the case.

[eek]

But CEST doesn't ask if the client would accept a substitute. It asks if a substitute has been used, and whether the client have the right to reject a substitute. Answering No/Yes can still lead to an outside result.

Of course, if, during an investigation, the client says they would not accept a substitute, then that is significant and HMRC would just (attempt to) ignore CEST. But, in this case, the OPs HR department said CEST always gives an Inside IR35 determination based on substitution. That is patently not the case.

We don't know what the other answers are - those other answers had clearly already tipped the balance before substitution became an issue.

[thatdarnguy]

I don't think it does - in your first post it says you need a new contract were you to work for a different end client.

What happens if the current client asked you to work on a different project for a few days or doing something on your current project which is outside what you believe the scope is. Would that require a new agreement?

If I was asked to work on a different project (by my client, not my client's client) for a few days, this would be acknowledged in writing as a formalised agreement and I have the right to reject the work, if I accept I'd be given an additional project code to assign my timesheets against. The work I perform for my client's client is specialised and "silo'd", so being asked to perform work outside of this area frankly won't happen. I've had discussions about working on a different project through my client for a different client of theirs, and although this hasn't materialised as an opportunity, if it happens it would come with a new contract and agreement, which I'd then have to review separately against IR35.

[simes]

Its certainly not ideal, but note that CEST can be given "substitute can be rejected by client" answers and still provide an outside result.

https://www.contractoruk.com/forums/...ml#post2738187

I concur.

The below answers give an Outside determination.


What do you want to do?
Make a new determination

Are you trading through a limited company, partnership or unincorporated body?
Yes

Have you already started working for this client?
Yes

2. Worker’s duties
Will you be an ‘Office Holder’?
No

3. Substitutes and helpers
Have you ever sent a substitute to do this work?
No, it has not happened

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

4. Working arrangements
Does your client have the right to move you from the task you originally agreed to do?
No, that would require a new contract or formal working arrangement

Does your client have the right to decide how the work is done?
No, you solely decide

Does your client have the right to decide your working hours?
No, you solely decide

Does your client have the right to decide where you do the work?
No, you solely decide

5. Worker’s financial risk
Will you have to buy equipment before your client pays you?
No

Will you have to fund any vehicle costs before your client pays you?
No

Will you have to buy materials before your client pays you?
No

Will you have to fund any other costs before your client pays you?
Yes

How will you be paid for this work?
An hourly, daily or weekly rate

If the client was not happy with your work, would you have to put it right?
Yes, unpaid but your only cost would be losing the opportunity to do other work

6. Worker’s involvement
Will your client provide you with paid-for corporate benefits?
No

Will you have any management responsibilities for your client?
No

How would you introduce yourself to your client’s consumers or suppliers?
You are an independent worker acting on your client’s behalf

7. Worker’s contracts
Does this contract stop you from doing similar work for other clients?
No

Are you required to ask permission to work for other clients?
No

Are there any ownership rights relating to this contract?
No

Have you had a previous contract with this client?
No

Is the current contract the first in a series of contracts agreed with this client?
No

Does the current contract allow for it to be extended?
Yes

Will this work take up the majority of your available working time?
Yes

Have you done any self-employed work of a similar nature for other clients in the last 12 months?
Yes

...All of which resulted in an Outside determination.

[northernladuk]

I concur.

But they aren't realistic in most cases.

4. Working arrangements
Does your client have the right to move you from the task you originally agreed to do?
No, that would require a new contract or formal working arrangement

Right and how you achieve this through paperwork are two different things. I haven't seen CEST so is the answer above an option you tick or are you just explaining it. The client will see they have the right to do it. If they do then you need to contract paperwork. It's highly likely they will still think they have the right to do it. This will need the client to change their working culture in many cases, particularly large orgs. It's possible but definitely not a given. The first of many questions where what we think/assume does not meet reality.

Does your client have the right to decide how the work is done?
No, you solely decide

Depends if they see the contractor using their methodologies/tools. If you are a PM they may insist you follow their framework so some clients will be inclined to say yes.

Does your client have the right to decide your working hours?
No, you solely decide

Hopefully this will always be a no but with professional courtesy playing a big part.

Does your client have the right to decide where you do the work?
No, you solely decide

We've seen this isn't the case in most situations so could quite easily be a yes for many orgs.

Will you have to fund any other costs before your client pays you?
Yes

I assume you mean expenses for running your business but the client won't see the question this way. They will assume it is things for you to do the gig you are in so in many times this will be no.

If the client was not happy with your work, would you have to put it right?
Yes, unpaid but your only cost would be losing the opportunity to do other work

This is never the case so I'd expect this to be a no from clients a vast majority of the time.

7. Worker’s contracts
Does this contract stop you from doing similar work for other clients?
No

Got to hope they read this properly and don't see it like a handcuff and think of other competitors

Have you had a previous contract with this client?
No

This one could go either way.

Is the current contract the first in a series of contracts agreed with this client?
No

Will be yes from the second gig or outside to inside obviously.

...All of which resulted in an Outside determination.

Which is very nice but pretty pointless if it doesn't reflect the situation.

[thatdarnguy]

These are the answers that were given by my client/hiring company that led to Inside IR35 - if I change either of the answers that I believe are in contention and listed in my OP that changes the result to outside:

1. About you and the work

Do you provide your services through a limited company, partnership or unincorporated association?

Yes

Have you already started working for this client?

Yes

2. Worker’s duties

Will you be an ‘Office Holder’?

No

3. Substitutes and helpers

Has the worker ever sent a substitute to do this work?

No, it has not happened

Do you have the right to reject a substitute?

Yes

Has the worker paid another person to do a significant amount of this work?

No

4. Working arrangements

Does your client have the right to move you from the task you originally agreed to do?

No, you would have to agree

Does your client have the right to decide how the work is done?

No, you solely decide

Does your client have the right to decide your working hours?

No, the work is based on agreed deadlines

Does your client have the right to decide where you do the work?

No, the task sets the location

5. Worker’s financial risk

Will you have to buy equipment before your client pays you?

No

Will you have to fund any vehicle costs before your client pays you?

No

Will you have to buy materials before your client pays you?

No

Will you have to fund any other costs before your client pays you?

No

How will you be paid for this work?

An hourly, daily or weekly rate

If the client was not happy with your work, would you have to put it right?

Yes, you would fix it in your usual hours at your usual rate or fee

6. Worker’s involvement

Will your client provide you with paid-for corporate benefits?

No

Will you have any management responsibilities for your client?

No

How would you introduce yourself to your client’s consumers or suppliers?

You are an independent worker acting on your client’s behalf

7. Worker’s contracts

Does this contract stop you from doing similar work for other clients?

No

Are you required to ask permission to work for other clients?

No

Are there any ownership rights relating to this contract?

No

Have you had a previous contract with this client?

No

Is the current contract the first in a series of contracts agreed with this client?

Yes (current contract has been extended once for 6 months with rate uplift)

Will this work take up the majority of your available working time?

Yes

Have you done any self-employed work of a similar nature for other clients in the last 12 months?

No

[thatdarnguy]

4. Working arrangements
Does your client have the right to move you from the task you originally agreed to do?
No, that would require a new contract or formal working arrangement

Right and how you achieve this through paperwork are two different things. I haven't seen CEST so is the answer above an option you tick or are you just explaining it. The client will see they have the right to do it. If they do then you need to contract paperwork. It's highly likely they will still think they have the right to do it. This will need the client to change their working culture in many cases, particularly large orgs. It's possible but definitely not a given. The first of many questions where what we think/assume does not meet reality.

Snipping what to what I believe is the key point. Yes the question in CEST is "Does your client have the right to move you from the task you originally agreed to do?", 3 options are "Yes", "No, that would require a new contract or formal working arrangement" and "No, you would have to agree"

Requiring the new contract or working arrangement has a high weighting toward outside ir35 in the tool and would resolve my determination - a couple replies back I detailed why I think my answer should reflect this.

I think the biggest problem is that so many questions are seemingly purposefully vague and open to interpretation (and abuse).

Being mercenary (and aren't we all, being contractors), if an outside determination was given by the end client based on the result from the tool, then the hmrc investigated this it would be the end client's liability post-April 6th, and ours prior to this? So for a hypothetical example; If the contract was extended on April 6th for another 6 months, end client deemed it to be outside, hmrc investigate and disagree - who would pick up the legal fees, if there are any? Then, if the end client just rolls over and accepts the liability and back taxes, does that then mean hmrc will pursue the contractor separately?

[WordIsBond]

Snipping what to what I believe is the key point. Yes the question in CEST is "Does your client have the right to move you from the task you originally agreed to do?", 3 options are "Yes", "No, that would require a new contract or formal working arrangement" and "No, you would have to agree"

Requiring the new contract or working arrangement has a high weighting toward outside ir35 in the tool and would resolve my determination - a couple replies back I detailed why I think my answer should reflect this.

Yes, that's one of the idiocies of CEST. Intentionally so, I suspect.

If you are contracted to do something and you are asked to do something else, and "you would have to agree," then your agreement constitutes a new contract. It might only be a verbal agreement, but verbal contracts are binding.

So to weight these two answers with a substantive difference is wrong in fact and in law. To throw someone inside IR35 because the client chose "you would have to agree" instead of "a new formal agreement" is an injustice. In a B2B relationship, an agreement is an agreement whether "formal" or not. If my tiler starts tiling the bathroom and my wife doesn't like it, and I say, "I'll pay you £500 to take that away and use these tiles instead," it doesn't matter whether we have new "formal" agreement or not.