Reply to: Is this contract drifting into IR35?

[el duder]

stop being so damned paranoid.

[Limited]

I'm sure it does for those consultancies that routinely have multiple clients for fixed price pieces of work which is part and parcel of their business model. I'm not this is the case here though.

maybe but their reasons for doing it are the same -
compensate for loss of opportunity / reduced utilisation of consultants
make sure customers treat bookings seriously

I'm just doing the same over here

I do routinely have multiple clients, just don't (often) do fixed price work - projects are usually too short and too badly defined until we get started

[Denny]

well I wouldn't be the only consultancy charging a cancellation charge

a quick google of

"consultancy charging for cancellation"

shows that it appears in the T&Cs of quite a few companies

I'm sure it does for those consultancies that routinely have multiple clients for fixed price pieces of work which is part and parcel of their business model. I'm not this is the case here though.

[Limited]

well I wouldn't be the only consultancy charging a cancellation charge

a quick google of

"consultancy charging for cancellation"

shows that it appears in the T&Cs of quite a few companies

[Denny]

thanks for your replies Denny. Without wishing to go off-piste a bit on this subject...

the situation I was thinking about is where you are actually turning down or delaying other work so you have suffered a loss and if, for example, you are told the day before that the agreed start date has been moved

If you turn down other work, then that's part and parcel of being in business. That's why you need to have other subs in place to pick up the work you can't do yourself. Unless you can demonstrate that you were charged yourself for turning down other business that operates on a different model, then you could only pass on these actual costs to your client.

I don't buy the second argument either. If you already know that your commercial relationship with your client is based on flexibility on when the work will start then you can hardly claim they've let you down when they move the start date. This arrangement seems to be part and parcel of your agreed commercial relationship that doesn't go outside the usual expectations.

Whatever way to try and dress it up, it seems to me that you are actually being hired as a flexible temp worker in practice, to carry out any work on site they choose to give you when it comes up at any given time at their own convenience and that they expect you to be available when it suits them and not you (implied MOO), even if that is not your intention or the stated intention of the client to hire you as a temp worker. That's why they have agreed to pay you for time you've been inconvenienced for. If you want to remain outside IR35 legitimately you will have to start putting your foot down and either accept the risks involved with shifting dates and not charging without just cause, or set up a different commercial relationship with the client. You can't have it both ways.

[Limited]

And his statement of 'loss of earnings' doesn't really hold up either since a company makes revenue not earnings employees make earnings - I'm seeing the true situation here through the fog now.

That may be my mistake, but surely you don't have to be a company to not be an employee

[Limited]

thanks for your replies Denny. Without wishing to go off-piste a bit on this subject...

the situation I was thinking about is where you are actually turning down or delaying other work so you have suffered a loss and if, for example, you are told the day before that the agreed start date has been moved

So this isn't a notice period, or responsibility to renew a contract or anything like that, just a responsibility to stick to the dates that have been agreed. If I'd cancelled my dentist appointment this morning I would still have to pay for it.

[boredsenseless]

Your client is not responsible for you not being able to arrange work in time, and to hold him responsible in this way is not good business practice.

Not having a chance to arrange other work in time is not the same as actually losing out on client business whereby proveable material losses are an issue as conducive with the kind of business you're in. Otherwise, we would all be able to do this. Contract ends but we insist on a fee from our direct clients or EB because we don't have something else lined up straight away afterwards.

You're on dodgy ground with this arrangement as you are setting up your commercial relationship with this client in such a way as to negate risk with the client picking up the costs and risk on your behalf. That is employment.

And his statement of 'loss of earnings' doesn't really hold up either since a company makes revenue not earnings employees make earnings - I'm seeing the true situation here through the fog now.

[Denny]

when I say 'normally', what I really mean is that I have the right to do so in the contract. This is to cover the situation where I don't have a chance to arrange other work in time, so have suffered loss of earnings

In reality I would never push this as it wouldn't be the best for the relationship with the client and only used if they really took the p1ss.

I've seen this sort of thing before as a permie working for a consultancy. Always in contract, sometimes threatened, hardly ever used

Your client is not responsible for you not being able to arrange work in time, and to hold him responsible in this way is not good business practice.

Not having a chance to arrange other work in time is not the same as actually losing out on client business whereby proveable material losses are an issue as conducive with the kind of business you're in. Otherwise, we would all be able to do this. Contract ends but we insist on a fee from our direct clients or EB because we don't have something else lined up straight away afterwards.

You're on dodgy ground with this arrangement as you are setting up your commercial relationship with this client in such a way as to negate risk with the client picking up the costs and risk on your behalf. That is employment.

[Limited]

when I say 'normally', what I really mean is that I have the right to do so in the contract. This is to cover the situation where I don't have a chance to arrange other work in time, so have suffered loss of earnings

In reality I would never push this as it wouldn't be the best for the relationship with the client and only used if they really took the p1ss.

I've seen this sort of thing before as a permie working for a consultancy. Always in contract, sometimes threatened, hardly ever used

[Denny]

Thanks

I've been trying to work out how to arrange this differently

normally if I arrange a site visit and its cancelled at short notice then I would still charge for that day - (MOO? - surely not)

sometimes I get v busy and would encourage customers to get a date in the diary quite a bit in advance

this is really a combination of both but with flexibility to suit me. Do I just need to expand the areas of work that I will be involved in my SOW. Now this project has gone live its difficult to work out a schedule of work other than
- today - fix things quickly before users notice
- tomorrow - think of good excuse why it works like that

Again, you have to be very careful about charging when there is no work, even if it is cancelled at short notice with no prior warning. I would put in your own terms that there is a call out charge or 'on call' charge applicable for cancellation at short notice, however the work that was cancelled still needs documenting otherwise what are they cancelling apart from your time? You also need to ask yourself what justification would you have for charging an' on call' fee unless you had other work that was cancelled leading to material losses? In any event, if it was justified it should certainly be set at a rate that covers just your admin overheads not the same fee you would charge as if you were actually doing the 'work' (time) that was cancelled. After all, if you call out a plumber, and he arrives but you've fixed your own leaky tap, they don't charge out the entire rate for fixing the tap do they? They charge out a nominal rate to cover overheads and inconvenience of loss of business - usually a fixed rate of about £40-60.

If this is not the case, and there is no loss of business elsewhere, then an 'on call charge' is hardly applicable and could be deemed as an unlawful charge and could be recoverable by the client (isn't that what banks are having to do now they've been rumbled for excessive charges on late payment fees).

The whole point about being in business (IR35 exempt) is that there are real risks associated with the business and that you have invested in business opportunities that could result in a loss. What better way to demonstrate that except by not charging when there is no work (in the absence of no material losses gained from lost business elsewhere).

If you are still charging without the above being a probability then you are well within the realms of MOO and therefore could be deemed as acting as an employee as it implies that they have to provide you with work and you are entitled to be paid. Not good for IR35 exemption.

[rootsnall]

Sounds like you are one of the safer contractors amongst us. Stop worrying so much !

I'm not sure how true it is in reality but the perception I have always had is that if you are doing lots of different 'shortish' contracts you are an unlikely IR35 target. Take out some sort of investigation insurance to put an initial buffer between you and the taxman and I would think if they are only chasing relatively small amounts of money for each contract they won't bother. I know some contractors who have been at one client for years and would get slaughtered if they lost an investigation, if I was in that boat I would be more worried.

Does anybody know how much info the taxman has when they first decide to investigate you !?

Thinking about it they may only have your annual accounts and no idea of how the money has been earned. Would they only get to see your individual contracts once a full blown IR35 investigation is under way ?

[Limited]

Although you have some flexibility around your working arrangements with the client, I would still suggest that you are dangerously bordering on IR35 inclusion even if you do fit your work around other client work (which is in your favour). However, there is too much permission being sought and you don't have a formal Schedule of Works drawn up detailing what significant pieces of work need to be completed within the specified contractual period. This points to implied MOO as it is your time (and on site?) that is deemed siginficant and because you are given any bits of work to make up the time rather than the contract focusing on the work that forms the basis of the contract in the first place.

I would adjust your commericial relationship with this client just to stay on the safe side.

Thanks

I've been trying to work out how to arrange this differently

normally if I arrange a site visit and its cancelled at short notice then I would still charge for that day - (MOO? - surely not)

sometimes I get v busy and would encourage customers to get a date in the diary quite a bit in advance

this is really a combination of both but with flexibility to suit me. Do I just need to expand the areas of work that I will be involved in my SOW. Now this project has gone live its difficult to work out a schedule of work other than
- today - fix things quickly before users notice
- tomorrow - think of good excuse why it works like that

[Denny]

Hi, usual apologies if this is covered elsewhere - and sorry that this has turned into a long post

I work in a fairly niche market with plenty of different customers for short projects working direct, through agency or another consultancy. So I rush around with laptop, get statement of work for everything I do, quite a bit of financial risk in some of my work etc etc

but - most of the time the contract is quite undefined - eg work on project x for up to 20 days, dates and times to be agreed. I'll sit down with the client and plan the work and the days that I will be on site. They only pay for the days I use and if its looking like its going to take longer then I tell the client and they decide whether to order more work. All standard stuff and not MOO I guess

So I started work with a new customer a few months ago. The usual vague requirements. Agreed to deliver up to 60 days work. Obviously fixed dates cannot be worked out that far in advance as I still have to fit it around other clients, so we agreed to aim for 4 days a week (now 3). And so we started on pretty much the same basis as I would do with any customer.

So over the months its started to feel like I actually work there (even though part time). I've never really worried about IR35 before as I guess I've never even come close, but is it possible that this contract is drifting towards IR35 as they now want to buy some more days? I didn't start with that intention and my T&Cs are the same as for all my assignments (certainly not a sham in those cases)

Some facts
- HR requires I have a pass to get in building due to length of time I'm there
- practicallity requires I have my own desk, pc, login, email account
- was invited to the xmas party (didn't go because I was ill)
- I do decide which days I come in so that I can fit other work in - but usually try to fit around what this client needs
- I try to match working hours to not look like I'm skiving
- I get a constantly updated list of (quite detailed) requirements and priorities from the PM (does this count as control?)
- While waiting for other areas of the project to catch up I have done some work on other areas of the system (didn't hear the alarm bells)

Any thoughts please? I know I could pay for some advice but thought I'd try and get some for free

thanks

Although you have some flexibility around your working arrangements with the client, I would still suggest that you are dangerously bordering on IR35 inclusion even if you do fit your work around other client work (which is in your favour). However, there is too much permission being sought and you don't have a formal Schedule of Works drawn up detailing what significant pieces of work need to be completed within the specified contractual period. This points to implied MOO as it is your time (and on site?) that is deemed siginficant and because you are given any bits of work to make up the time rather than the contract focusing on the work that forms the basis of the contract in the first place.

I would adjust your commericial relationship with this client just to stay on the safe side.

[simondolan]

Obviously too much time on your hands. You should be in wind-down mode. On the other hand, I have a few contracts here to be reviewed in you fancy something to do this afternoon.

Sure - no problem