Reply to: IR35 Review, Not Impressed

[LisaContractorUmbrella]

Yes you are right - the whole point of IR35 is to differentiate between a business i.e. a legal entity that will operate under a business to business contract and a disguised employee. However, you also need to be aware that changing what is written in a contract will not alter your working arrangements and therefore will not alter your position within the terms of the legislation.

Don't be too hard on NLUK - although you have only asked the question once, he has probably answered it several thousand times

[sb3502]

Good stuff



Erm... <cough>... pardon? I thought you had a reasonable grasp of the issues? This is one of the most fundamental ones. It appears a little knowledge is a dangerous thing.

I would point you at the newbie basic IR35 guides at the right hand side for further reading.

Perhaps if you spent a little more of your attention span reading what has been written rather than considering how you can reply in the most sarcastic and unhelpful way you might appreciate that I chose my phrasing to suggest humility. I was asking for advice to check my understanding and as a newbie on this forum. You might well feel that this is covered in existing posts and newbie guidance, but since I'd just received a contrary professional opinion, my question was valid. I know full well the implications and was just looking for confirmation that I wasn't barking. Fortunately others decided to help and I'm grateful to them.

SB

[sb3502]

Having written approval in advance isn't an issue as long as it states the circumstances under which approval will be given/withheld. For example:

Approval will only be withheld on the grounds of security, qualifications or expertise - fine and reasonable.

Approval will be at the clients discretion - so they could refuse someone for having blue hair? Being male?

The first is reasonably unfettered. The second could be argued not to be. How can you have a RIGHT of substitution when the person you send can be refused for any reason whatsoever.

The contract refers to him & he - what do the definitions say? If they say that 'he' refers to he/she/it then it may not be an issue, although I have to agree it's something that I'd flag up in a review. Is the contract between your limited company & the agent/client? Are you named personally?

Also don't forget that it only need to succeed on 1/3 to pass. If you fail substitution but have a superb control or MOO clause, then it could still pass even though personal service is required.

If in doubt, get a second opinion from another specialist.

Thank-you and sorry for delay in acknowledging your help. I managed to get all these things fixed with the client before signing.
SB

[northernladuk]

I've been contracting for about 3 years and have taken the time to read extensively on IR35, so feel I have a reasonable grasp of the issues including contract wording.

Good stuff

Am I wrong in thinking that I'd be on pretty shaky ground with such a contract or could at least significantly improve it by making it a true contract for services from my ltd co and not implying that its a contract with an individual?

Erm... <cough>... pardon? I thought you had a reasonable grasp of the issues? This is one of the most fundamental ones. It appears a little knowledge is a dangerous thing.

I would point you at the newbie basic IR35 guides at the right hand side for further reading.

[malvolio]

If in doubt, get a second opinion from another specialist.

Good that you know enough to be wary of the advice you've been given, but even if not in doubt, don't get an opinion from someone with a vested interest in selling you something. You're buying a professioanl service, not supplying sales leads.

HTH

[Clare@InTouch]

I too sent a contract for review last week to the company which provides my IR35 investigation insurance. It was returned same day with a "pass". The email included a sales message about PI and liability insurance (which this contract does actually stipulate). I also got a second email from someone else at the same company trying to sell the same insurance.

My issue with this is not the sales approach (which might actually be quite useful), but that in my view the contract assessment was completely incorrect. I've been contracting for about 3 years and have taken the time to read extensively on IR35, so feel I have a reasonable grasp of the issues including contract wording. This particular contract had numerous references to the consultant as "him" or "he" and even included a data protection section allowing the client to process the "personal data" not of the consultant's personnel but of the consultant. The client also had to give their written approval in advance for substitutes.

Am I wrong in thinking that I'd be on pretty shaky ground with such a contract or could at least significantly improve it by making it a true contract for services from my ltd co and not implying that its a contract with an individual?

I spoke with the reviewer and they agreed to review again and send me a new assessment on Thursday but I haven't had it yet (and its now too late to be of use). This was not my experience two years ago when they reviewed a contract for me as then there was some useful input on areas to improve.

Very unimpressed and although some of their other insurance products look useful and reasonable value, I don't think I'll be buying there again out of principle. I agree you get what you pay for and I'm not expecting the earth, but what is not helpful is a review of a contract which is dangerously inaccurate.

Having written approval in advance isn't an issue as long as it states the circumstances under which approval will be given/withheld. For example:

Approval will only be withheld on the grounds of security, qualifications or expertise - fine and reasonable.

Approval will be at the clients discretion - so they could refuse someone for having blue hair? Being male?

The first is reasonably unfettered. The second could be argued not to be. How can you have a RIGHT of substitution when the person you send can be refused for any reason whatsoever.

The contract refers to him & he - what do the definitions say? If they say that 'he' refers to he/she/it then it may not be an issue, although I have to agree it's something that I'd flag up in a review. Is the contract between your limited company & the agent/client? Are you named personally?

Also don't forget that it only need to succeed on 1/3 to pass. If you fail substitution but have a superb control or MOO clause, then it could still pass even though personal service is required.

If in doubt, get a second opinion from another specialist.

[sb3502]

Similar experience here.

I too sent a contract for review last week to the company which provides my IR35 investigation insurance. It was returned same day with a "pass". The email included a sales message about PI and liability insurance (which this contract does actually stipulate). I also got a second email from someone else at the same company trying to sell the same insurance.

My issue with this is not the sales approach (which might actually be quite useful), but that in my view the contract assessment was completely incorrect. I've been contracting for about 3 years and have taken the time to read extensively on IR35, so feel I have a reasonable grasp of the issues including contract wording. This particular contract had numerous references to the consultant as "him" or "he" and even included a data protection section allowing the client to process the "personal data" not of the consultant's personnel but of the consultant. The client also had to give their written approval in advance for substitutes.

Am I wrong in thinking that I'd be on pretty shaky ground with such a contract or could at least significantly improve it by making it a true contract for services from my ltd co and not implying that its a contract with an individual?

I spoke with the reviewer and they agreed to review again and send me a new assessment on Thursday but I haven't had it yet (and its now too late to be of use). This was not my experience two years ago when they reviewed a contract for me as then there was some useful input on areas to improve.

Very unimpressed and although some of their other insurance products look useful and reasonable value, I don't think I'll be buying there again out of principle. I agree you get what you pay for and I'm not expecting the earth, but what is not helpful is a review of a contract which is dangerously inaccurate.

[LisaContractorUmbrella]

I disagree with NLUK,Clare, Lisa, Greg, SJD contract specialist. If the contract says the company must provide its staff to perform the agreed services, without naming any particular individual, surely that amounts to the same thing as an unfettered right of substitution? The company is free to send Tom, Dick or Harry to do the job as it sees fit.

Assuming there is no agency involved or, if there is, the end-client/agency contract does not conflict with the lower-level contract, this is a clear IR35 pass.

You are quite within your rights to disagree but, with the greatest of respect, you're wrong. A loosely worded contract is not worth the paper it's written on in the event of an HMR&C investigation. As others have said there are many more considerations not least that the end client has to agree to a representative of your business completing the work rather than the individual that they interviewed and they have to accept it more or less without question. If you are working direct this will be easier to achieve than if you secured the contract through an agency but even so, in an investigation, you would still have to demonstrate that you could actually provide a substitute so, if you don't know anyone that could do your job you are scuppered from the start.

Finally, even if you actually managed all this you would be unlikely to get an IR35 pass without fulfilling all the other requirements regarding MOO and direction and control.

[SueEllen]

I disagree with NLUK. If the contract says the company must provide its staff to perform the agreed services, without naming any particular individual, surely that amounts to the same thing as an unfettered right of substitution? The company is free to send Tom, Dick or Harry to do the job as it sees fit.

Knowing people who have had issues with HMRC, I've been informed it's best to ensure your contracts are as clearly worded as possible to ensure no ambiguity.

In this case there are at least 6 people who disagree with you that it's not a straight IR35 pass especially as any inspector would actually question the client to find out the true meaning.

[northernladuk]

Ah yes, good point. As an agent i like to, where I can, let the contractors know the mark up we are working with when discussing initial rates so nothing is hidden from anyone in the equation.
Always seems to make the relationship a little more equitable!

Even Russell comes up with better pap than this.....

[northernladuk]

I disagree with NLUK, Clare, Lisa, Greg, SJD contract specialist. If the contract says the company must provide its staff to perform the agreed services, without naming any particular individual, surely that amounts to the same thing as an unfettered right of substitution? The company is free to send Tom, Dick or Harry to do the job as it sees fit.

Assuming there is no agency involved or, if there is, the end-client/agency contract does not conflict with the lower-level contract, this is a clear IR35 pass.

Fair enough but just modified the list of people you are disagreeing with. I still don't see how on earth you can take what is a wooly comment that we question to be an unfettered right. If it is going to be free or restriction it needs to be worded a lot better than it is.

[malvolio]

The company I'm working for has just done a review on insurances and upped the limits to £1M for PI and PL. They also now insist on EL at £1M although the lowest amount Hiscox will give is £5M. Bumped my premiums up from c£300 to c£500 (with Tax Investigation as well). Anyway I pushed back on the EL saying I was exempt but they then stressed it was a plus from an IR35 perspective as it covers substitutes. It's only an extra £40 a year I think so maybe a good buy ?

I recall answering that one a while back. You need EL if you take on any worker, employed or subbie. Without it your RoS can be easily invalidated and there goes a big part of your IR35 defence kit. For £40, just do it.

[manfromtheagency]

Sadly the agency will usually not let you see a copy of the upper contract, probably because it shows your full rate and therefore their commission. Some contracts do include a clause to state that the upper contract matches the lower in all terms, but oddly some contain a clause to say there's no guarantee that the upper matches the lower!

Ah yes, good point. As an agent i like to, where I can, let the contractors know the mark up we are working with when discussing initial rates so nothing is hidden from anyone in the equation.
Always seems to make the relationship a little more equitable!

[radish2008]

EL as well as PI and PL

The company I'm working for has just done a review on insurances and upped the limits to £1M for PI and PL. They also now insist on EL at £1M although the lowest amount Hiscox will give is £5M. Bumped my premiums up from c£300 to c£500 (with Tax Investigation as well). Anyway I pushed back on the EL saying I was exempt but they then stressed it was a plus from an IR35 perspective as it covers substitutes. It's only an extra £40 a year I think so maybe a good buy ?

[gary]

I disagree with NLUK. If the contract says the company must provide its staff to perform the agreed services, without naming any particular individual, surely that amounts to the same thing as an unfettered right of substitution? The company is free to send Tom, Dick or Harry to do the job as it sees fit.

Assuming there is no agency involved or, if there is, the end-client/agency contract does not conflict with the lower-level contract, this is a clear IR35 pass.