Reply to: Claiming expenses incurred abroad finding client

[jamesbrown]

<My company staff> shall have sex with Angelina Jolie all day every day

<trips over in rush to check contracts>

[TheFaQQer]

The contract also states the below. Guess it only helps if my client does not say otherwise:

"<My company> and <my company staff> shall serve solely as independent contractor’s performing services for Client, and not as employees, partners, representatives or joint ventures of Client."

Anyway, I get the point. I'll check with an expert. End of.

If the contract said "<My company staff> shall have sex with Angelina Jolie all day every day", and it doesn't reflect the reality of the situation, it isn't going to happen

That's why the contract and working practices review by an expert are important.

[buddy99]

I'd have thought that when threatened with the tax authorities, most American companies would bend over backwards to comply with a simple request to answer the question. And if they know nothing of IR35 then why wouldn't they be honest and say "we always saw him as an employee"?

Even if they remain silent, that doesn't prevent HMRC from assuming that the arrangement is a sham because there was no unfettered right of substitution in the contract.

The contract also states the below. Guess it only helps if my client does not say otherwise:

"<My company> and <my company staff> shall serve solely as independent contractor’s performing services for Client, and not as employees, partners, representatives or joint ventures of Client."

Anyway, I get the point. I'll check with an expert. End of.

As for my original question expenses, sounds like its at best, a "maybe" situation with some risk but ultimately the consensus seems to be to worry about other more pressing things for now. Thanks to everyone(with maybe one exception) for your help! I know, as with all advice, it is just advice but it does make things a little clearer now before I go to an accountant.

[jamesbrown]

I'd have thought that when threatened with the tax authorities, most American companies would bend over backwards to comply with a simple request to answer the question. And if they know nothing of IR35 then why wouldn't they be honest and say "we always saw him as an employee"?

Even if they remain silent, that doesn't prevent HMRC from assuming that the arrangement is a sham because there was no unfettered right of substitution in the contract.

Whose tax authorities? HMRC have no jurisdiction in the US, obviously, and it's unlikely that the client would be caught off-guard. This would immediately get pushed to their legal department. Also, HMRC can assume what they like; they need to demonstrate the absence of all three pillars (of which lack of D&C is, arguably, the most important and straightforward to demonstrate, barring an actual substitution), and it will be tough (but certainly not impossible) if they only have a solid contract and supporting evidence coming from the OP. However, as I said, it changes nothing about the reality of the situation, and the OP should treat this as any other engagement. One can expect that HMRC will pursue any case doggedly, even when faced with clearcut evidence, such as an actual substitution.

[TheFaQQer]

Although I agree with the sentiment, it's inconceivable that a US company would respond to HMRC unless being compelled to do so through international channels, which is quite unlikely (as, I believe, Contreras alluded to). That doesn't change anything about the reality of the situation or the need for the OP to assess that reality, but it does present a real, practical, challenge in terms of gathering evidence. Bottom line, the OP should have their contract and working practices reviewed, as many of us have suggested, several times.

I'd have thought that when threatened with the tax authorities, most American companies would bend over backwards to comply with a simple request to answer the question. And if they know nothing of IR35 then why wouldn't they be honest and say "we always saw him as an employee"?

Even if they remain silent, that doesn't prevent HMRC from assuming that the arrangement is a sham because there was no unfettered right of substitution in the contract.

[Contreras]

Consider this hypothetical exchange:
[INDENT]HMRC: Would you have allowed buddy99 to sub-contract any of his work?

ClientCo: Generally, no. Once we enter into a contract with someone we expect them to deliver the service uninterrupted, where possible, for the sake of continuation, efficiency and convenience.

HMRC: What if they were sick?

ClientCo: If (s)he was off sick for a few days then we would look to put their work on hold, but if it was longer than that then we would have to consider what was best for the project.[/INDENT

Alternatively:

HMRC: Would you have allowed buddy99 to sub-contract any of his work?

ClientCo: Not interested, sorry.

HMRC: What if they were sick?

ClientCo: <silence>

IMHO the remote working and consequent lack of D&C would make IR35 a non-issue so long as there's nothing silly in the contract, which the OP won't know unless either they get it reviewed or HMRC come knocking.

Just saying like. Now about that currency risk...

[jamesbrown]

Consider this hypothetical exchange.

Although I agree with the sentiment, it's inconceivable that a US company would respond to HMRC unless being compelled to do so through international channels, which is quite unlikely (as, I believe, Contreras alluded to). That doesn't change anything about the reality of the situation or the need for the OP to assess that reality, but it does present a real, practical, challenge in terms of gathering evidence. Bottom line, the OP should have their contract and working practices reviewed, as many of us have suggested, several times.

[TheFaQQer]

"If client is dissatisfied with Personnel supplied by (my company), (my company) will remove such person or persons and may provide a replacement as soon as practicable. If Client notify (my company) of its dissatisfaction prior to conclusion of the person’s or persons’ fourth day of work, (my company) will not charge for the first 24 hours worked."

Without anything that says why they can veto your substitute, I think that you'd struggle to show that it's a genuine right of substitution. What prevents them saying "we don't like her name" or "we just aren't satisfied" and insisting that it's you personally that does the work?

Does the contract reflect the reality? In some ways yes, in others not so much. I set my own hours, where I work and how I work but I do take their loose guidance as to what areas I work on. I don't think they would really expect or appreciate me(my company) sending a substitute or indeed taking work with another client ,even though the contract allows it - that said it has never been discussed.

And this is where part of the problem comes - you have it in writing, but someone only needs to say "well, we wouldn't have accepted that - we never intended that to happen" and it helps HMRC a lot. Consider this hypothetical exchange:

HMRC: Would you have allowed buddy99 to sub-contract any of his work?

ClientCo: Generally, no. Once we enter into a contract with someone we expect them to deliver the service uninterrupted, where possible, for the sake of continuation, efficiency and convenience.

HMRC: What if they were sick?

ClientCo: If (s)he was off sick for a few days then we would look to put their work on hold, but if it was longer than that then we would have to consider what was best for the project.

The client isn't explicitly ruling it out, but there's plenty in there that HMRC could easily take to argue that you didn't have a right of substitution. You would then be left with either abandoning that pillar of your defence and focussing on one of the other two, or trying to convince HMRC (or the tribunals) that just because the client said "generally", that didn't apply to you.

Anyway, what I say isn't important. It's what the professionals say that is - and ultimately even that is open to debate and discussion. What one expert says is a pointer, another may say is negligible at best. The important thing is to work out what you need to do, and make sure that you have professional representation available to you if HMRC ever come calling.

[jamesbrown]

What do you think?

Honestly, it doesn't matter what we think. You need to have it reviewed professionally. I know you'd like an opinion on individual pieces here, but it's a complete waste of time, as a contract needs to be reviewed in the round.

[northernladuk]

What do you think?

It doesn't matter what TF thinks (no disrespect TF) it's what the professionals think. At what point are you going to get that a go speak to them rather than trolling the forum?

[buddy99]

Does the contract reflect the reality of the situation?

(And if they have an absolute right of veto, then you haven't really got a right of substitution)

Well it says the following, this means a veto, right?

"If client is dissatisfied with Personnel supplied by (my company), (my company) will remove such person or persons and may provide a replacement as soon as practicable. If Client notify (my company) of its dissatisfaction prior to conclusion of the person’s or persons’ fourth day of work, (my company) will not charge for the first 24 hours worked."

Does the contract reflect the reality? In some ways yes, in others not so much. I set my own hours, where I work and how I work but I do take their loose guidance as to what areas I work on. I don't think they would really expect or appreciate me(my company) sending a substitute or indeed taking work with another client ,even though the contract allows it - that said it has never been discussed.

What do you think?

[Contreras]

Thanks for the vote of confidence! I spent some time researching IR35 and then re-read my contract. The below points in my contract seemed to suggest I was outside IR35(based on contract at least) but I will of course confirm with a professional.

1) The contract states that my company is solely responsible for the "means and manner" in which the work for this client is completed and performance of the agreement shall be judged solely on the results.
2) The contract states that my company is provided work by my client "as needed, from time to time" with no guarantee of paid work being available.
3) The contract states that my company is expressly free to send substitutes although these may be vetoed by the client.
4) The contract states that my company is expressly free to obtain work from other clients at any time and does not have an exclusively agreement with the client.
5) The contract strictly forbids any member of my company from receiving any employee benefits or perks.

All my contracts have had that.

Not all have passed a contract review.

Supposed lack of D&C won't stop Hector getting his teeth in, but a watertight contract and no client to hassle probably would.

[TheFaQQer]

Thanks for the vote of confidence! I spent some time researching IR35 and then re-read my contract. The below points in my contract seemed to suggest I was outside IR35(based on contract at least) but I will of course confirm with a professional.

1) The contract states that my company is solely responsible for the "means and manner" in which the work for this client is completed and performance of the agreement shall be judged solely on the results.
2) The contract states that my company is provided work by my client "as needed, from time to time" with no guarantee of paid work being available.
3) The contract states that my company is expressly free to send substitutes although these may be vetoed by the client.
4) The contract states that my company is expressly free to obtain work from other clients at any time and does not have an exclusively agreement with the client.
5) The contract strictly forbids any member of my company from receiving any employee benefits or perks.

Does the contract reflect the reality of the situation?

(And if they have an absolute right of veto, then you haven't really got a right of substitution)

[buddy99]

Yes, this is absolutely right. Clearly, the OP read a little about IR35 overnight and decided they didn't want to be inside .

Thanks for the vote of confidence! I spent some time researching IR35 and then re-read my contract. The below points in my contract seemed to suggest I was outside IR35(based on contract at least) but I will of course confirm with a professional.

1) The contract states that my company is solely responsible for the "means and manner" in which the work for this client is completed and performance of the agreement shall be judged solely on the results.
2) The contract states that my company is provided work by my client "as needed, from time to time" with no guarantee of paid work being available.
3) The contract states that my company is expressly free to send substitutes although these may be vetoed by the client.
4) The contract states that my company is expressly free to obtain work from other clients at any time and does not have an exclusively agreement with the client.
5) The contract strictly forbids any member of my company from receiving any employee benefits or perks.

[Pondlife]

What's the betting how to get paid and currency will be next....

^ this