Reply to: Agency contracts in light of IR35 defeat

[The Lone Gunman]

I'd love to work direct. Client refused my IR35 compliant contract. Client insisted on their own contract which fails IR35 (my insurer, QDos, checked it for me)

So agency I inserted gave me an IR35 compliant contract to sign (checked by QDos). Had I signed the client's IR35 fail contract i wouldn't have lost 7k in the agency cut.. but then I'm clearer on the IR35 front as the contract I have from the inserted agency is IR35 compliant..

However.. i'm pretty sure the agency signed the client's IR35 fail contract... frustrating that its not them that will have to pay if there is ever an investigation.

Thanks, rich

If the client would not sign an IR35 contract with you then I am sure they will not have changed their mind with an agent. I am also sure that the working practices will be IR35 caught. So you have just paid an agent for nothing. Would your IR35 bill have been 7K?
You should have taken the direct at a rate to compensate or walked away.

Write to your agent and ask them to confirm that your contract is valid and back to back with the client and that they have agreed all terms and working practices with the client.
Also look into a "statement of intent" on the usual web sites and see if you can get your client to sign one.

This seems a clear case of a client using a contractor when they want a permie but dont want to have to hassle of employing someone.

[richy]

Why are you inserting an agent? Working direct is better.

I'd love to work direct. Client refused my IR35 compliant contract. Client insisted on their own contract which fails IR35 (my insurer, QDos, checked it for me)

So agency I inserted gave me an IR35 compliant contract to sign (checked by QDos). Had I signed the client's IR35 fail contract i wouldn't have lost 7k in the agency cut.. but then I'm clearer on the IR35 front as the contract I have from the inserted agency is IR35 compliant..

However.. i'm pretty sure the agency signed the client's IR35 fail contract... frustrating that its not them that will have to pay if there is ever an investigation.

Thanks, rich

[The Lone Gunman]

Well if it costs me 8% to insert an agent between me and the client to get the IR35 compliant contract.. that is about 7000 pounds.. makes me wonder if i should have just put up with client's non IR35 contract.. especially as most of the money is paid to consultant on PAYE..

Why are you inserting an agent? Working direct is better.

[richy]

Our contracts are not worth the paper they are written on, it is the real working practice that matters. Dragonfly reinforces this. Sometimes I think we would be better with verbal agreements only. I intend to try and discuss terms at interview stage from now on and hopefully get written confirmation.

Your contract allows for 2 things.
1. You can show the tax man due diligence by having it checked so when you sign your tax form as outside IR35 you were sure you were correct. This means the tax man should not hit you for penalties.
2. You can sue the arse off the agent for misrepresentation should your contract turn out to be a sham.

Well if it costs me 8% to insert an agent between me and the client to get the IR35 compliant contract.. that is about 7000 pounds.. makes me wonder if i should have just put up with client's non IR35 contract.. especially as most of the money is paid to consultant on PAYE..

[malvolio]

You really are clueless, aren't you?

Yes, and you're a fat slob with BO...

Which bit of "I could be wrong" do you not understand? Which bit of the rest of the post is demonstrably wrong? It's only an opinion, if it spoils your world view then either argue against it or butt out. I could care less which option you choose.

[Fred Bloggs]

In other words, however secure you may be in being outside IR35 you will still rely on end client to endorse it. That's one hell of a risk, and one that will nearly always work in HMRC's favour.

Correct. To make it worse when you're investigated the client rep could be someone who never knew you, never worked with you, wasn't even at the client company at the time and probably not even at the same site. Basically, if a client rep stands up in court years later and says "We wouldn't accept the Ltd Co/Agency contract as real", well, then you're stuffed and mounted. It's very scary and very high risk. IR35 is now, more than ever, a lottery.

[BolshieBastard]

AIUI it simply upheld the original ruling and so has not changed existing case law. ICBW

It also did not discuss MOO which was not part of the appeal but arguably should have been. The challenges were on RoS - clearly unsupportable in this case - and D&C where things got a little confused (to say the least) partly because of poor wording in the original contract.

Nevertheless, this case like all IR35 cases is decided on interpretation of extremely vague guidance, using criteria not originally established for that purpose and by creating notional contracts that can, as here, contradict the actual contracts signed by all parties in good faith. IR35 remains unworkable and unjustifiable.

You really are clueless, aren't you?

[tim123]

Actually it's both, they now seem to use working practices as the arbiter and the contract where there is ambiguity, which I suppose is fair enough. Clearly they thought D&C was present in reality (becasue a tester's work was subject to QA checks, mainly, which seems just a little tenuous) and quoted the contract to support their view

You saw different evidence to me.

The evidence that I saw said that he was under D&C because he was asked, on an ad hoc basis, "to run text X *now*".

This seems a reasonable enough ruling to me. It's not HMG's fault that the client wants a permatemp.

ISTM if a contractor wants to be outside of IR35 (on the D&C rule) he has to avoid jobs that expect this. But IME this cuts your potential clients down considerably.

YMMV.

tim

[Emigre]

Actually it's both, they now seem to use working practices as the arbiter and the contract where there is ambiguity, which I suppose is fair enough. Clearly they thought D&C was present in reality (becasue a tester's work was subject to QA checks, mainly, which seems just a little tenuous) and quoted the contract to support their view

I happen to work via a different scheme but if I was through a Ltd Co I would be outside IR35 on a working practices basis, largely because there is little or no direction from end client management. This is because they are not interested in the particular project (its neither IT nor career positive!) that I'm working on. Progress meetings are feedback rather than direction. The real problem though is that put in front of the Commissioners/Court I'm certain that end client would portray a very different perspective (ie the guy I report to would infer that he was completely on top of everything etc etc).

In other words, however secure you may be in being outside IR35 you will still rely on end client to endorse it. That's one hell of a risk, and one that will nearly always work in HMRC's favour.

[malvolio]

Actually it's both, they now seem to use working practices as the arbiter and the contract where there is ambiguity, which I suppose is fair enough. Clearly they thought D&C was present in reality (becasue a tester's work was subject to QA checks, mainly, which seems just a little tenuous) and quoted the contract to support their view

[tim123]

AIUI it simply upheld the original ruling and so has not changed existing case law..

That's not my understanding.

The original ruling did not create case law (it does create a compelling argument for the benefical party, but not one that would be guaranteed to win)

But AIUI taking it to appeal and losing, turns it into case law.

It also did not discuss MOO which was not part of the appeal but arguably should have been. The challenges were on RoS - clearly unsupportable in this case - and D&C where things got a little confused (to say the least) partly because of poor wording in the original contract.

And there was me thinking that it was the actual working practices that were most important

tim

[malvolio]

AIUI it simply upheld the original ruling and so has not changed existing case law. ICBW

It also did not discuss MOO which was not part of the appeal but arguably should have been. The challenges were on RoS - clearly unsupportable in this case - and D&C where things got a little confused (to say the least) partly because of poor wording in the original contract.

Nevertheless, this case like all IR35 cases is decided on interpretation of extremely vague guidance, using criteria not originally established for that purpose and by creating notional contracts that can, as here, contradict the actual contracts signed by all parties in good faith. IR35 remains unworkable and unjustifiable.

[tim123]

Dragonfly still worries me, but for a different reason. The commssioner's views on RoS are dodgy enough, his view on MOO was seriously perverse; in effect the ignored the "No work, no pay" and replaced it with an entirely theoretical idea that since the AA always had work to be done, they would always be requied to pay their contractors. I have no idea why that wasn't challenged, since it is more out of step with established case law than anything else.

I think this one will run and run. Only good thing is that by stopping at the SC it hasn't established any new case law, itself a good reason to leave it alone since taking a challenge to the High Court might seriously backfire.

You must be talking about something else because the High Court certainly seem to think that they have ruled on "Dagonfly"

http://www.bailii.org/cgi-bin/markup...2008/2113.html

And FWIW, I don't agree that the judge moved the goalposts wrt MOO. He may have moved them from your understanding, but that is because your understanding was wrong. There is plenty of previous cases to show that that MOO is not as simple as "not getting paid if you do no work".

tim

[malvolio]

Dragonfly still worries me, but for a different reason. The commssioner's views on RoS are dodgy enough, his view on MOO was seriously perverse; in effect the ignored the "No work, no pay" and replaced it with an entirely theoretical idea that since the AA always had work to be done, they would always be requied to pay their contractors. I have no idea why that wasn't challenged, since it is more out of step with established case law than anything else.

I think this one will run and run. Only good thing is that by stopping at the SC it hasn't established any new case law, itself a good reason to leave it alone since taking a challenge to the High Court might seriously backfire.

[richy]

Our contracts are not worth the paper they are written on, it is the real working practice that matters. Dragonfly reinforces this. Sometimes I think we would be better with verbal agreements only. I intend to try and discuss terms at interview stage from now on and hopefully get written confirmation.

Your contract allows for 2 things.
1. You can show the tax man due diligence by having it checked so when you sign your tax form as outside IR35 you were sure you were correct. This means the tax man should not hit you for penalties.
2. You can sue the arse off the agent for misrepresentation should your contract turn out to be a sham.

Thanks for the reply. Due diligence is good

The other wonder I had, as I've got a new client (with IR35 fail contract again). Is it worth then putting it through an agency just to get an IR35 pass contract? Even though that agent is going to take 8% as their margin? .. the alternative is my QDos policy being invalidated cos I was operating with failing contracts.. although then the client's IR35 fail contract is still signed by the agent..