Question about subcontracting as a public sector contractor under new rules

[Effrafax of Wug]

Hi,

I'm working out how to satisfy substitution conditions (with it being such a big part of the new HMRC ESI tool). Strikes me that after April sub-contracting will no longer be a workable way to do that as it would make me a "paying agent" so liable to all the checks and penalties... so probably meaning I would become responsible for deducting PAYE & NI for the sub-contractor (in other words... nobody would touch it). Am I missing something or has the new regime just ruled out sub-contracts as a substitution option?

Background is that I am working with a client to find ways to round off a project that will go into the new tax year. Neither of us really wants them to have to pay the high rate that working inside IR35 would mean (but we're running out of options).

[malvolio]

I get a sneaky feeling that attempts to "work around" the problem will result in HMRC ignoring the tool and making their own decision, so be careful with that approach.

Also be sure you understand the difference between substitution and sub-contracting. A substitute is you sending in someone to do your job in place of you under your contract, that you pay for out of your contract income. A sub-contractor is someone to whom you delegate some or all of the work who will supply your company as a third party and billing YourCo separately but not assuming any responsibility for your contract with the client.


The former is the one that counts, not the latter.

[northernladuk]

If you have to use a workaround to get an outside determination then the gig is inside and you are making a false declaration surely? It bad enough worrying about IR35 when it's a grey area let alone a contrived situation where an investigation means you'll get found out...if you get my meaning.

I'd imagine there will be a number of work arounds to get safe coming out over time and as they become 'standard' then HMRC will take an interest spoiling it for those doing it properly.... Again.

[Semtex]

If you have to use a workaround to get an outside determination then the gig is inside and you are making a false declaration surely? It bad enough worrying about IR35 when it's a grey area let alone a contrived situation where an investigation means you'll get found out...if you get my meaning.

I'd imagine there will be a number of work arounds to get safe coming out over time and as they become 'standard' then HMRC will take an interest spoiling it for those doing it properly.... Again.

but of course you are but 5% of the whole of freelance workers who trade with services and deliverables and the others are disposable?

IR35 is wrong not the 10000s of contractors who choose this way of working.

yet you always make it out that you are a superior contractor. NLUK you offer nothing to the average contractor on a forum board.

this clique on this board is unbelievable

[BigRed]

As you say you are working with the client to resolve this I'd have thought it was simple to change the contract to one which was clearly outside?

[northernladuk]

As you say you are working with the client to resolve this I'd have thought it was simple to change the contract to one which was clearly outside?

Well it should be already else there is a world of retrospective trouble coming his way. The WP have to match as well. If they don't they are going to be liable for it so not quite as simple as that.

[eek]

but of course you are but 5% of the whole of freelance workers who trade with services and deliverables and the others are disposable?

IR35 is wrong not the 10000s of contractors who choose this way of working.

yet you always make it out that you are a superior contractor. NLUK you offer nothing to the average contractor on a forum board.

this clique on this board is unbelievable

IR35 is the rules we have to work within. They may be wrong but after 15 years it's not as if it's going to disappear in the near future. Heck, the public sector changes built upon the twin foundations of ir35 and CIS make that very clear.

As for cliques and nluk that isn't relevant to this conversation. Nluk is correct that lying isn't going to solve a problem long term especially now it's not just the contractor being caught . Finance and HR departments of the public sector really don't want the pain / risk these ir35 changes have created so are taking a minimal risk approach and who can blame them?