Reply to: Collecting "Minor" IR35 Pointers

[jamesbrown]

Isn't that trying to prove a negative though?

Other than working when I want and where I want it seems to me to be difficult prove no SDC. I understand that it's difficult for HMRC to prove SDC as well but I'd rather be controlling the evidence if needed rather than reacting to it.

Happy to be proven wrong (by you not HMRC) though.

First, you need to dispel this talk of SDC, which has been marketed by HMRC as the "how" element of control, nothing more. The test in IR35 is D&C in its broadest sense. Until they bring forward an "SDC test", and new case law precedents are set, there is little point talking about SDC beyond what we currently understand as D&C (in the broadest sense). Next, no, it is very easy to demonstrate lack of D&C by recording information about each of the elements I mentioned. As I say, if it ever gets to tribunal, the overall picture of working practices is very important, and D&C most comprehensively captures actual working practices. As I also say, it is good to have evidence from as many other factors as possible. If you can point to instances where work has been offered and refused, that is great too, but you will note that (lack of) MoO is also negatively oriented. Likewise, if you can show evidence of an actual substitution, that is great, although you'll note that the Right of substitution is sufficient, if it can be proven. In most cases, it will be easier to evidence lack of D&C than lack of MoO or RoS, because lack of D&C is something that happens day-to-day.

[northernladuk]

I did this, so I guess it's one to put in the armoury. Right behind QDOS cover and a list of examples of how the client had zero control over my working practices and activities.

You did. In this contract or a previous one? IR35 is on a contract by contract basis do you could be running two in parallel and one could be inside and one outside. It looks good from a business perspective having parallel work but still they could find you inside on one. Previous subcontracting won't be very useful for investigations in to later contracts.

Sorry if I assumed incorrectly.

[Whoknows]

But be careful as it's no one of the pillars we are talking about and as I said until you actually do this it doesn't exist as a defense. It's also complex to properly as the article suggests.

I did this, so I guess it's one to put in the armoury. Right behind QDOS cover and a list of examples of how the client had zero control over my working practices and activities.

[Lance]

Rather, (lack of) D&C is arguably the most powerful and readily demonstrated, because it is incredibly broad in scope (what, when, where, how) and most closely approximates actual working practices, which trump any contract clauses.

Isn't that trying to prove a negative though?

Other than working when I want and where I want it seems to me to be difficult prove no SDC. I understand that it's difficult for HMRC to prove SDC as well but I'd rather be controlling the evidence if needed rather than reacting to it.

Happy to be proven wrong (by you not HMRC) though.

[jamesbrown]

I agree with this ^^^^^^. At the end of the day it's the one that you're unlikely to test anyway as you want to keep the cash not give it away.

SDC can be vague as well so, whilst I collect minor stuff, I rely on MOO as the main proof.
Only invoice for deliverables that refer to a project on your contract schedule. When getting new projects added to a schedule you instruct the agent that you have won new business and have chosen to accept it.
Evidence of the client asking you to do something and you telling them to foxtrot oscar (work stuff not staff parties/team building)*** Assuming of course that you stay in contract after that

I'd say that relying on MoO is the most tenuous of all positions, unless you have emphatic evidence. Any one of them is sufficient, but MoO is a difficult one to demonstrate satisfactorily, and involves two components (during the contract and afterwards). Rather, (lack of) D&C is arguably the most powerful and readily demonstrated, because it is incredibly broad in scope (what, when, where, how) and most closely approximates actual working practices, which trump any contract clauses. That said, it behooves you to demonstrate as many of the major factors as possible, as well as any minor pointers. In the highly unlikely event it ever gets to tribunal, it's about building a comprehensive picture.

[Lance]

But the upshot is relying on RoS that's in the contract but not tested is a very weak position to be in now. In fact looking at the number of articles coming out, I'd argue RoS is no longer a pillar unless you can prove beyond reasonable doubt you can or did.

I agree with this ^^^^^^. At the end of the day it's the one that you're unlikely to test anyway as you want to keep the cash not give it away.

SDC can be vague as well so, whilst I collect minor stuff, I rely on MOO as the main proof.
Only invoice for deliverables that refer to a project on your contract schedule. When getting new projects added to a schedule you instruct the agent that you have won new business and have chosen to accept it.
Evidence of the client asking you to do something and you telling them to foxtrot oscar (work stuff not staff parties/team building)*** Assuming of course that you stay in contract after that

[jamesbrown]

Right. I have quite a bit of work done by a subcontractor on some of my contracts, but that work is not work that I myself am expected to do in the contract. It obviously helps bolster the case that this is a B2B relationship but it is not the silver bullet that a true substitution would be, where I got someone in to do my part of the contract, for some reason. I do not rely on ROS to keep me outside of IR35.

Yep. Either way, it's a strong pointer to being in business, but the specific value of substitution is that it demonstrates a lack of personal service, whereas other forms of subcontracting may not.

[WordIsBond]

Subcontracting covers all scenarios where work is conducted by a third party. Substitution involves sending someone else, on behalf of YourCo (i.e. invoiced by YourCo), to do the work that you would otherwise have done yourself. An example would be if you're ill.

Right. I have quite a bit of work done by a subcontractor on some of my contracts, but that work is not work that I myself am expected to do in the contract. It obviously helps bolster the case that this is a B2B relationship but it is not the silver bullet that a true substitution would be, where I got someone in to do my part of the contract, for some reason. I do not rely on ROS to keep me outside of IR35.

[jamesbrown]

There's a difference between subcontracting and substitution. Subcontracting covers all scenarios where work is conducted by a third party. Substitution involves sending someone else, on behalf of YourCo (i.e. invoiced by YourCo), to do the work that you would otherwise have done yourself. An example would be if you're ill. Both subcontracting, in general, and substitution, in particular, are good pointers to being in business on your own account, but substitution is the most important one for IR35. Also, HMRC won't necessarily accept evidence of substitution or anything else as a "silver bullet", but you would likely win in the end.

[northernladuk]

I was only following your advice. I used Google. Found an article relevant to my query. Shared it here.

But be careful as it's no one of the pillars we are talking about and as I said until you actually do this it doesn't exist as a defense. It's also complex to properly as the article suggests.

[missinggreenfields]

I was only following your advice. I used Google. Found an article relevant to my query. Shared it here.

Yes, but did you ask your accountant as well?

[Whoknows]

Not sure what your point is with the above and yes it's good for your status but this can only be proven when it's done. There is nothing about subcontracting in your contract, insurances etc. Until it happens it's no defence at all. It's not one of the pillars and isn't there until it's there.

I was only following your advice. I used Google. Found an article relevant to my query. Shared it here.

[northernladuk]

Not sure what your point is with the above and yes it's good for your status but this can only be proven when it's done. There is nothing about subcontracting in your contract, insurances etc. Until it happens it's no defence at all. It's not one of the pillars and isn't there until it's there.

[Whoknows]

Contractors' Questions: How to subcontract some work?

Contractor’s Question: I’d like to subcontract some work to a contractor-friend I know for my client’s new project. But I don`t want this other contractor – who’s also a limited company - to invoice the client directly, I will pay him and his company. How would this set-up work for tax purposes; what about declaring it in my tax return and are there pitfalls?

Expert’s Answer: There is no problem about you invoicing your client for your sub-contractor`s work. In fact, it reinforces your status as being an independent consultant.

The rest of the article notes that when subcontracting you need to be careful of SDC or you may fall foul of the Onshore Intermediaries legislation on ‘false self-employment

[northernladuk]

I'd be careful with substitution though. Although it's one of the main pillars it's also the weakest of the three unless actually used. It appears the standard view unless proven otherwise nowadays is that it's a sham that won't actually work. It's ok us stating that until tested it's reasonable to assume it will stand because it's in the contact but the court takes the exact opposite view. Kate Cottrell and other have stated outright that RoS is now a minor point against the other pillars.

This article goes as far as to say that.

IT contractors warned on IR35 substitution clauses :: Contractor UK

I can't find the exact one where she states it's a minor one...

But the upshot is relying on RoS that's in the contract but not tested is a very weak position to be in now. In fact looking at the number of articles coming out, I'd argue RoS is no longer a pillar unless you can prove beyond reasonable doubt you can or did.