Reply to: IR35 in reality

[LondonManc]

Been away from UK for a while (7 years) and just catching up on latest IR35 information. I know you should get your contract reviewed from QDOS, but unless contracting in a clients workplace has changed dramatically I still think a huge amount of people would fall inside IR35 and are just hoping for the best. I mean HMRC can investigate you for last 20 years of taxes.

I think that varies from role to role - if you're a specialist, this is less likely to be the case while I would imagine generic PMO staff are a lot closer to IR35.

For example say you are a C# developer on a 6 month contract hired through an agency after having an interview (like a permie) at a clients office

I've never been spoken to about company benefits, long term career aspirations, etc. on a contracting interview.

1. Substitution
Would the client really except somebody else from your LTD company turning up for the day and doing your work? What about if you take a day off? You should really supply a replacement for yourself. I wonder if this has ever happened in reality

If it's in the contract that substitution is allowed but has never been exercised, it stands. HMRC can't prove retrospectively that it wouldn't have been allowed to have been used, simply because you chose not to.

2. SDC
You undertake pair programming as part of the contract (I’ve seen this advertised in many roles), is this a form of supervision, who knows? Do you decline?

How can you be supervised by someone who isn't a supervisor? Paired programming is more a case of real-time peer testing than supervision.

The client tells you that you need to “do” a piece of code in a certain way to follow company practices, is this direction?

No, it's working to the standards expected by the client.

Your contract states you have been engaged to create a banking portal backend. The project is held up by 2 days, the client asks if you can help out on another project? Do you say no, I can’t or I would need a new contract? Or leave for those 2 days unpaid

Depends on the item and whether it leads to a bigger piece of work for you. Treat each instance on its own merits. Politely decline because you aren't insured for it as part of your contract or explain that you're taking it on as a potential marketing exercise for your skills within a new team.

Most of the job ads I see on Indeed for example read like disguised permanent roles

“learning from and passing knowledge to like-minded and talented colleagues”
“Share and seek knowledge to enhance the output of the team”
“Work to deadlines”
“Share options in a rapidly growing company”
“You will need to work closely with our Senior Developer to successfully implement the company requirements”

Most clients like this are struggling to fill permie roles and have simply asked the agent to chop out the blatantly permie parts (benefits, etc.) from the original advert.

[SueEllen]

Don't know if this is threadjacking, but what's this business about laptops and phones being "excluded" from consideration in the checklist?

I've been at places (private sector) where it was explicit that permies got both of the above and contractors got neither.

HMRC made up things they think distinguishes permanent staff from contractors.

In reality if you had a case go to tribunal, which is unlikely if you are an IPSE member who has done due diligence on their contracts and working practices, then the judge won't be interested in that.

[Hobosapien]

Don't know if this is threadjacking, but what's this business about laptops and phones being "excluded" from consideration in the checklist?

I've been at places (private sector) where it was explicit that permies got both of the above and contractors got neither.

Anything in the working practices (such as equipment provision in your case) that differentiates you from the permies is a bonus.

[Ebenezer]

Don't know if this is threadjacking, but what's this business about laptops and phones being "excluded" from consideration in the checklist?

I've been at places (private sector) where it was explicit that permies got both of the above and contractors got neither.

[malvolio]

The way I work is usually outside IR35 (I do subcontracting, working from my own office most of the time, etc.), it's mostly the contract that worries me, not my working practices.

Good point. But not necessarily a realistic template for the more conventional worker then...

[ndl]

And, of course, ensure that those changes accurately reflect your actual working arrangements?

IR35 is not a ticklist operation.

The way I work is usually outside IR35 (I do subcontracting, working from my own office most of the time, etc.), it's mostly the contract that worries me, not my working practices.

[malvolio]

Yes, I had a contract which was a perfect example of being outside IR35, which was reviewed by the IR35 specialist. I've got a list of things to look for and usually go through all other contracts myself and get these things changed.

And, of course, ensure that those changes accurately reflect your actual working arrangements?

IR35 is not a ticklist operation.

[ndl]

Yes, I had a contract which was a perfect example of being outside IR35, which was reviewed by the IR35 specialist. I've got a list of things to look for and usually go through all other contracts myself and get these things changed.

Edit: I know it's not ideal, but I'll take the risks.

[northernladuk]

And have you had those changes reviewed by a IR35 contract specialist?

[ndl]

What I usually do is after working for some time for the client I tell them that I have to take care of some personal matters for a week or so and I don't really want the work to stop so I will subcontract someone I trust. This usually goes well. I get a contract signed with another person who does the work and I pay that person from my company's bank account. I believe this is a strong indication of being outside IR35.

Another thing I've noticed is that a lot of contracts do not have a clause for mutuality of obligation or if they do it usually begins with "Upon the termination or expiry of this Agreement, Employment Business will not be obliged to offer [blah blah blah]" which is not ideal, so I always try to get it changed to:
"The Client is not obliged to offer an Assignment to the Contractor and the Contractor is not obliged to accept any Assignment offered by the Client. There is no mutuality of obligation during or between Assignments. This Agreement is not an exclusive arrangement and nothing in it shall prevent the Contractor from providing services to an unrelated third party during an Assignment as long as it does so without detriment to its Services."

[TonyF]

Aye, a law unto themselves. So they can close exploited loopholes retrospectively and charge a penalty for the now overdue taxes.

So it's not enough you are adhering to the current rules, you also have to adhere to the spirit of the rules.

And what the spirit of the rule might be when they look back at some indeterminate point in the future...

[Hobosapien]

HMRC do this themselves.

Aye, a law unto themselves. So they can close exploited loopholes retrospectively and charge a penalty for the now overdue taxes.

So it's not enough you are adhering to the current rules, you also have to adhere to the spirit of the rules.

[swamp]

I'm just not comfortable accepting such a position if the agency is trying to mislead the PS client and/or HMRC by operating in a way that would otherwise not allow the client to declare the contact outside IR35.

It's one of those things that regardless of paperwork the actual working practices may mean the approach comes undone if HMRC investigate, and as yet there's been no court case to prove the client would be liable under the new PS IR35 rules. If the agency became liable they would no doubt try to pass the responsibility for tax due on to the contractor somehow.

It just seems a murky thing that HMRC will not see in a good light unless absolutely nailed down as above board in HMRC's eyes. Not sure how that could be proven up front without legal interpretation via a court.

HMRC do this themselves.

[malvolio]

I...snip... - no insurance required.

Unless you need to take it to appeal to ensure that you don't get stiffed with someone else's debt; plenty of contracts contain a "Supplier agrees to indemnify..." clause for example.

And yes I know nobody with any brains would sign such a thing, except they do, with monotonous regularity. The need for such insurance may be reduced, but the risks of having to fund a 5-figure court case plus appeals is still very real. And, of course, it may not be covered by IR35 insurance, since it is not IR35 that is in dispute.

[TonyF]

From a contractor's perspective then as long as the 'outside IR35' determination is accepted by an IR35 insurance company then you've mitigated the risk as much as you can if HMRC come sniffing.

At some point you have to take the agency's word on the contract they're offering and there's only so much they will divulge for due diligence, making sure it's all in writing so any issues reside with the agency if a court battle breaks out.

Worse case, put aside the potential 'inside IR35' cost as a medium term investment if HMRC don't follow up within the jurisdiction period.

If the work is public sector then from the contractor's perspective they are theoretically in the clear whatever happens - the client makes the decision whether they are in or out of IR35 and the agency takes the hit if they are wrong.

As long as there is nothing that prevents the agency from claiming back that money from the contractor, all is good as far as they are concerned - no insurance required.