Reply to: Some IR35 unfriendly contract wording ....or not?

[Olly]

However the fact you need to be present during the assignment (i.e. control of where and when, potentially having to ask for permission for time off, etc)

So the contract says....
"To be present during the times or for the total number of hours during each day and/or week of the Assignment as may be agreed with the Employment Business or the Client."

No agreement has been or will be made around times, there will be no need to as I will work a professional day so the topic will never come up so whilst it's a probably quite an odd thing to see in an IR35 friendly contract, it's mute.

The piece I'm really not keen on is the Schedule include an "Address where Assignment to be performed:"...that doesn't sit well at all!

I've never "asked" for time off in a contract before and I won't here. Of course I will inform the Client and Agency my services are not available as matter of courtesy.

...and accept reasonable direction of staff (i.e. control of what and how) are stronger indicators of inside IR35.

So the contract says...
"To co-operate with the Client’s staff and accept the reasonable direction of any person in the Client’s organisation to whom it is required to liaise and comply with all reasonable and lawful instructions within the scope of the Assignment made by the Client. Nothing in this provision will affect the reasonable autonomy of the Contractor or its Representative in relation to determining the method of performance of the services."

Again, I don't like it and I've never seen similar before but I suppose it boils down to the meaning of direction. Of course the client has to tell you what they want.

This contract in reality will be like all the others I've done I'm sure.
Some of those contracts had supposedly squeaky clean IR35 friendly wording, some maybe less so, but I and tens of thousands of other IT contractors who work in very similar actual conditions consider themselves outside IR35 and it certainly appears, that of the small proportion investigated, by and large that holds true.

[JB3000]

....hmm so talking further to the agency they have basically said "we're not changing the contract".

It's interesting to hear the different and somewhat divergent professional views, hence exactly why I try to become knowledgeable on such matters myself.

I'm happy to share the full contract but there is nothing else particularly negative in respect of IR35 (and not much positive either).

At the end of the day the working practices of the contract will be like the ones the vast majority of us on this site do...taking up the gaps because the client feels (for what ever reason) a contractor is best placed to fill that role(s).
I'll "report to" a line manger or two in terms of them asking me to do stuff, I'll almost certainly not provide a substitute. Nobody will tell me exactly how to do the job because we're a bit beyond that in terms of skillset and seniority, but then again, being told exactly "how, where and when" something should be done rather than being tasked with meeting a goal has been the norm for most of my working life and I expect for yours.

IR35 insurance is something I'll consider, in fact I'll almost certainly take it up since this role is my highest day rate so far and not to shabby by most people's standards.

Anyway, they say they won't modify it, one professional isn't sounding alarm bells, the other is, I don't fancy calling the agency's bluff based on mixed messages when there's the option to protect against it.

Mind you, going to read the fine print of any insurance carefully!!

I have had instances where both B&C and Qdos have reviewed exactly the same contract and B&C have said "Failed" and Qdos have said "Passed" (went to Qdos due to the fail from B&C!). I think the same is going to happen in this situation as well. It is interesting, drawing from my experiences, it always seems to be this way around (in my experience, I can't remember ever seeing a fail from Qdos).

The right the end client has over your ability to appoint a substitute is a weak indicator that IR35 applies. So don't worry about this too much.

However the fact you need to be present during the assignment (i.e. control of where and when, potentially having to ask for permission for time off, etc) and accept reasonable direction of staff (i.e. control of what and how) are stronger indicators of inside IR35.

The fact that no one will tell you exactly what to do is neutral if you are a highly skilled worker (neither indicating inside/outside IR35 position). "Reasonable autonomy" seems to be window dressing on the agency/end client's part, i.e. something the lawyers have thrown in last minute to try to make it sound like your engagement is outside IR35. Window dressing clauses are useless in the event of an IR35 investigation.

Consequently, on balance, I would tend to agree with B&C rather than Qdos' analysis.

Given that B&C will probably say inside and Qdos will probably say outside, and given no contract amendments can be made, it might be worth giving the contract directly to HMRC on the off chance you are actually outside IR35:

HM Revenue & Customs:IR35 - Assistance/Free advice available

Then again this is probably a really terrible idea as you are shouting "investigate the last 6 years of my tax affairs and all tax affairs going forward.

Consequently it is probably best to speak to an accountant well verse in IR35 and expect to take salary rather than dividends.

[Kate Cottrell]

It's hard not to pay attention to the two professionals who have contributed thus far.

I have been contracting for a long time and have never felt the need to have contract reviewed, having successfully re-negotiated any clauses that I had an issue with. I have noticed though that recently, many agents are playing hardball to the extent they will let you walk away even at start deadline -1 hour. This is personal experience and anecdotal so I know that it is happening. So in future, I will be getting them reviewed particularly for the benefit you undoubtedly gain from an arms length professional conducting the negotiations.

I have a few questions if the professionals wouldn't mind answering;

1. Even though my negotiations up until recently (probably 20 or so contracts over the years not inc extensions) have been quite successful, I never get to speak to anyone other than the monkey. When you negotiate, do you actually get to speak to the organ grinder i.e. someone who is legally qualified?
   
2. Are you finding also that agencies are getting more difficult to negotiate with?
   
3. Are there times when you are unable to make a difference and of those times, are they always with the same agencies?

Thanks for your time

At B&C we have been negotiating contracts for more than 10 years now. This means we have built up excellent relationships with the agencies. We do not ask for wholly unrealistic changes, such as an unfettered right to substitute. In answer directly to your questions:

1. We usually deal direct with the relevant legal team (organ grinders) but always keep the recruiters in the loop.
   
   1. No we are not finding agents more difficult. By speaking to them and being able to back up every request with the relevant case law they are mostly extremely helpful. We have also undertaken a lot of work with agencies to get their contracts up to speed. Yes there is the odd few but as our IR35 decision is based upon the working practices then even if we fail to get the contract changed we can still give an outside IR35 opinion.
      
      Hope this helps.
      

[Zero Liability]

Accountax is also good for reviews and also offer a form of IR35 insurance. They enjoy a similar track record to Qdos in defending contractors.

[Olly]

That may be your experience, and perhaps even the majority experience here, but there are quite a few of us that aren't bums on seats that receive directions on what to do, when, or where, beyond a set of requirements and deliverables. Don't con yourself that the contract matters that much if you're indistinguishable from permies in terms of routine and delivery.

Hang on, I just said my experience was that I usually do get the equivalent of "a set of requirements and deliverables", I've worked at perhaps 10 different organisations as a contractor, more I think, at every one, all the IT contractors I knew were in a similar boat,, but then again that's almost exactly the same level of control as the perm staff received.

Working away from the office is usually frowned on but that depends on the organisation, again, it's been the same kind of ethos for both contract and perm staff there though.

There may be "quite a few" who don't operate like that, indeed I didn't for a 3 day piece of work for Wrigley, but I'm am certain the majority of IT contractors do. No we're not "disguised employees", but the nature of IT contracting usually means you get stuck in there with perm staff on a fairly even basis.

I was once in the position to execute the right to substitution but the margin was too small to make it worthwhile, I imagine it's a very rare occurrence, I know of nobody first hand who has done so.

I posted the "bad bits" of the contract, I'm not a numpty, most of the contract is boiler plate stuff that I know for sure has no IR35 implication and there is nothing tucked away in any appendix or definition.

You're right a well worded response from someone with lawyer type letters after their name may have an impact, I'll give it some more thought.

[jamesbrown]

....hmm so talking further to the agency they have basically said "we're not changing the contract".

It's interesting to hear the different and somewhat divergent professional views, hence exactly why I try to become knowledgeable on such matters myself.

I'm happy to share the full contract but there is nothing else particularly negative in respect of IR35 (and not much positive either).

At the end of the day the working practices of the contract will be like the ones the vast majority of us on this site do...taking up the gaps because the client feels (for what ever reason) a contractor is best placed to fill that role(s).
I'll "report to" a line manger or two in terms of them asking me to do stuff, I'll almost certainly not provide a substitute. Nobody will tell me exactly how to do the job because we're a bit beyond that in terms of skillset and seniority, but then again, being told exactly "how, where and when" something should be done rather than being tasked with meeting a goal has been the norm for most of my working life and I expect for yours.

IR35 insurance is something I'll consider, in fact I'll almost certainly take it up since this role is my highest day rate so far and not to shabby by most people's standards.

Anyway, they say they won't modify it, one professional isn't sounding alarm bells, the other is, I don't fancy calling the agency's bluff based on mixed messages when there's the option to protect against it.

Mind you, going to read the fine print of any insurance carefully!!

That may be your experience, and perhaps even the majority experience here, but there are quite a few of us that aren't bums on seats that receive directions on what to do, when, or where, beyond a set of requirements and deliverables. Don't con yourself that the contract matters that much if you're indistinguishable from permies in terms of routine and delivery.

You only posted a snippet, but you'll need a full contract review to know the full extent of any issues with the contract. At that point, you may find that one of the professionals can negotiate changes for you, even if the agency is currently saying otherwise.

[Olly]

....hmm so talking further to the agency they have basically said "we're not changing the contract".

It's interesting to hear the different and somewhat divergent professional views, hence exactly why I try to become knowledgeable on such matters myself.

I'm happy to share the full contract but there is nothing else particularly negative in respect of IR35 (and not much positive either).

At the end of the day the working practices of the contract will be like the ones the vast majority of us on this site do...taking up the gaps because the client feels (for what ever reason) a contractor is best placed to fill that role(s).
I'll "report to" a line manger or two in terms of them asking me to do stuff, I'll almost certainly not provide a substitute. Nobody will tell me exactly how to do the job because we're a bit beyond that in terms of skillset and seniority, but then again, being told exactly "how, where and when" something should be done rather than being tasked with meeting a goal has been the norm for most of my working life and I expect for yours.

IR35 insurance is something I'll consider, in fact I'll almost certainly take it up since this role is my highest day rate so far and not to shabby by most people's standards.

Anyway, they say they won't modify it, one professional isn't sounding alarm bells, the other is, I don't fancy calling the agency's bluff based on mixed messages when there's the option to protect against it.

Mind you, going to read the fine print of any insurance carefully!!

[eazy]

REC Contract ?

Looks like a REC contract with slight modifications. Below are another version of the key clauses.

Substitution
The Consultancy shall be entitled to assign, substitute or sub-contract the performance of the Consultancy Services provided that the Consultancy is satisfied that the assignee, substitute or sub-contractor has the required skills, qualifications, resources and personnel to provide the Consultancy Services to the required standard and that the terms of any such assignment or sub-contract contain the same obligations imposed by this Agreement. The consultancy’s obligation to provide the consultancy services shall be performed by such member or members of the consultancy’s employees, officers or representatives (“representative(s)”) as the consultancy may consider appropriate. Prior written consent from the client will be required before substitution can take place and consent will not be unreasonably withheld.

Control
The Consultancy shall have autonomy in relation to determining the method of performance of the Consultancy Services but in doing so it shall co-operate with the Client and comply with all reasonable and lawful instructions, as are applicable to an independent contractor, within the scope of the Consultancy Services and the Assignment made by the Client. The Employment Business shall use reasonable endeavours to ensure in the Employment Business’s contract with the Client that the Client shall not be entitled to exert any supervision, direction or control over the manner in which the Consultancy Services are performed.

Mutality of Obligation
The Employment Business has no obligation to offer future work to the Consultancy and if it does make any such offer, the Consultancy is not obliged to accept it. The Employment Business is not obliged to pay the Consultancy at any time when no work is available during the current Assignment.

[LisaContractorUmbrella]

Sorry Lisa, I meant 3

[tractor]

...

Yeah, when NLUK and LisaContractorUmbrella post advice you would do well to listen!!

Sorry Lisa, I meant 3

[northernladuk]

It's hard not to pay attention to the two professionals who have contributed thus far.

Yeah, when NLUK and LisaContractorUmbrella post advice you would do well to listen!!

[jamesbrown]

So if you've got a bullet-proof contract but you can't even go for a wee without the client's permission then HMRC will consider you inside IR35.

But what if the situation is directly inverted? i.e. you have a contract stating you are the client's bitch but in fact you have absolute freedom to deliver the work on your terms? Are you still considered inside IR35?

Is having a bullet-proof contract simply a means of putting HMRC off the scent?

The second scenario is just going to create a major headache, even if you come out on top. I don't think anyone would want a lengthy investigation by choice. If the contract is poorly worded, the chances of ending an investigation quickly are going to be reduced, plus there's always a degree of risk that you haven't documented the working practices adequately or the end client fails to confirm them adequately (e.g. due to time elapsed). Better to have a strong contract and to retain clear evidence of working practices (e-mails where you notify of time off, evidence of refusing work, evidence of lack of D&C in terms of what/where/when/how, differences in treatment of contractors vs. permies, use of subcontracting/substitution etc.) in order to stop an investigation quickly.

[tractor]

...

IR35 is and always has been about working practices it's just that, historically, HMRC assumed that what was written in a contract was reflective of what happened in reality.

In the past, HMRC would also cite the contract if it was more beneficial to them or the reality if it was vice versa i.e they wanted their cake and to eat it. I don't know how they play it now.

[LisaContractorUmbrella]

So if you've got a bullet-proof contract but you can't even go for a wee without the client's permission then HMRC will consider you inside IR35.

But what if the situation is directly inverted? i.e. you have a contract stating you are the client's bitch but in fact you have absolute freedom to deliver the work on your terms? Are you still considered inside IR35?

Is having a bullet-proof contract simply a means of putting HMRC off the scent?

IR35 is and always has been about working practices it's just that, historically, HMRC assumed that what was written in a contract was reflective of what happened in reality.

[I just need to test it]

So if you've got a bullet-proof contract but you can't even go for a wee without the client's permission then HMRC will consider you inside IR35.

But what if the situation is directly inverted? i.e. you have a contract stating you are the client's bitch but in fact you have absolute freedom to deliver the work on your terms? Are you still considered inside IR35?

Is having a bullet-proof contract simply a means of putting HMRC off the scent?