Reply to: Can the substitute be billed at a lower rate?

[VirtualMonkey]

get a new contract drawn up for your company to supply the 'help' at the lower rate then exercise MOO on your own contract for the term.
surely that would look good when considering IR35

[rd409]

Says who?

The HMRC questionnaire is pretty clear actually. "Have you sent a subbie in when you couldn't work", if the answer is yes then you are straight into the lower risk category. Most likely it would be "Thanks for your time, no further questions".

What if you hire a tradesman to do a job and something else comes up so he subs it out to his apprentice and the tradesman gives you a discount as a recognition that the subbie isn't quite as skilled?

Spin it around the other way. Would a permie ever pay someone to cover for him while he took a holiday and take a pay cut for doing so? No, of course not.

The key here is different scope. What I said was if you offer to charge less for the same piece of work done by someone else, then this shows control by the client, which is not good.

Also because the work is out of scope for the original schedule, I would recommend, the OP raise a quotation for additional work, and then hire a helper to get that done. Remember, now he is charging differently for additional work that was not covered by the original contract, so he can technically hire a sub/helper to get that piece of work done.

Lastly, why would a permie pay someone to cover him when he is on holiday? He gets paid holidays, unlike contractors. The whole scenario of substitution is to keep the project going and money rolling in.

[Wanderer]

Slightly different analogy. You hire a building company to build a wall, and they provide a quotation. The builder wishes to hire a sub to finish off that task.

• If you pay less, then this is not substitution

Says who?

The HMRC questionnaire is pretty clear actually. "Have you sent a subbie in when you couldn't work", if the answer is yes then you are straight into the lower risk category. Most likely it would be "Thanks for your time, no further questions".

What if you hire a tradesman to do a job and something else comes up so he subs it out to his apprentice and the tradesman gives you a discount as a recognition that the subbie isn't quite as skilled?

Spin it around the other way. Would a permie ever pay someone to cover for him while he took a holiday and take a pay cut for doing so? No, of course not.

[ecc83]

Not to labour a point here but I think it is key. The sub is doing a different piece of work. This seems to get glossed over but to me is the bit that breaks the whole scenario.

I read it as: same project/work, different scope. So it's a helper/assistant rather than a sub.

The builder analogies are bogus - who pays a builder by the day!? - but if someone was building a wall for you and said, look, I won't be in this week, but I'll send the lad in and he'll do a few little jobs and keep things ticking over - you as client would have a reasonable expectation to pay less for that.

Seems ok to me. Employees can't use helpers, right?

[BlasterBates]

Even if the work is going to be slightly different, the fact that a sub was sent in I believe would be a major plus point.

Having read up on court cases on IR35 I've never seen the case where the "substitue" was argued as not being a substitute because he did slightly different activities, and the fact that you're billing for the work someone else is doing is major pointer to being in business on your own account.

The point about IR35 is to demonstrate that you are different from the permies, and certainly a permie wouldn't be able to send someone in and charge for him.

It has been argued in court that the fact that it would be difficult for a substitute to come in and replace a contractor would not be a negative pointer rather as it would reflect the commercial situation that skill is rare, if I remember correctly. Therefore I think the fact that substitute came in on the project and was given slightly different activities a reflection of the realities of the commercial situation. In the end the client would still be making use of a resource that moves the project on.

[northernladuk]

Not to labour a point here but I think it is key. The sub is doing a different piece of work. This seems to get glossed over but to me is the bit that breaks the whole scenario.

[rd409]

Thinking of it from a builder's point of view then there's two ways to go:

If you hire a company to build a wall you agree a price for the job, and if they send a little helper in to do it for them that doesn't lower the price and you don't expect it to. A price is a price when you're talking about a fixed job.

OR

If you hire a company to demolish your garden you may get a bill at the end that has varying levels of fees for the workers involved - labourer at £10, site manager at £50 etc. It doesn't change the fact that you hired the company, not the individuals directly. You wanted a job done and it was done, you don't care that different people did different parts at different rates - you're interested in the end result.

With that logic it doesn't seem an issue as far as IR35 goes. That's not to say HMRC wouldn't argue it of course, but I can see how it could be countered.

Slightly different analogy. You hire a building company to build a wall, and they provide a quotation. The builder wishes to hire a sub to finish off that task.

• If you pay less, then this is not substitution
• If you pay the same rate, because the work is done this is full substitution.
• If you pay the same rate, but then deduct money for substandard work, that is full substitution as well.
• If you ask for an additional task to be done, and pay it at a different rate, then there is no substitution, but the builder has just hired a helper to get more work from the client.

I don't really know what OP's situation is, but it might be very complicated.

Dave.

[Gentile]

The objection is he is not a sub. He is billed at a different rate and doing a different piece of work than that detailed in the contract. This can mean one of two things surely... client direction or he isn't a sub of that contract.

WHS

[Clare@InTouch]

Thinking of it from a builder's point of view then there's two ways to go:

If you hire a company to build a wall you agree a price for the job, and if they send a little helper in to do it for them that doesn't lower the price and you don't expect it to. A price is a price when you're talking about a fixed job.

OR

If you hire a company to demolish your garden you may get a bill at the end that has varying levels of fees for the workers involved - labourer at £10, site manager at £50 etc. It doesn't change the fact that you hired the company, not the individuals directly. You wanted a job done and it was done, you don't care that different people did different parts at different rates - you're interested in the end result.

With that logic it doesn't seem an issue as far as IR35 goes. That's not to say HMRC wouldn't argue it of course, but I can see how it could be countered.

[LisaContractorUmbrella]

The objection is he is not a sub. He is billed at a different rate and doing a different piece of work than that detailed in the contract. This can mean one of two things surely... client direction or he isn't a sub of that contract.

Are you saying what does it matter if he is a direct sub or not? I guess that is true but doing work not contracted is not a good place to be surely?

I think it could be viewed positively by HMR&C depending on the circumstances - they want everyone to act like a business - in this instance the original contract is maintained with additional work being requested by clientco. The OP has satisfied that demand by providing a member of staff to carry out the extra work, provided that he/she is still under the original contract and has not been replaced by the sub I can't see the problem. Obviously, as with everything HMR&C related, the devil will be in the details but as long as the sub is employed by the OP and under their direction in terms of being given a piece of work to do I think they'd be ok

[northernladuk]

It's all playing with words I guess. Can you not call your sub - "sub" and call him "helper"? You don't have to be around him while he is helping you out on the project. As for the IR35 benefits, I guess helpers have the same effect as sub IMHO.

Dave.

The helper is an interesting suggestion. Hadn't thought of that. I just think HMRC will look at the uber details of a situation like this so I think worth thinking about it at that level rather than just say 'Yeah fill your boots'

[rd409]

This sub stuff is great and we never get chance to discuss it but I think the alarm bells are going here.

Your sub well, kind subs you. But in this case he is doing a different piece of work, somewhere client direction has crept in here. Different piece of work, different rate. In the eyes of HMRC this is NOT your sub. It is your client getting a different piece of work done by a different person at a different rate. If not that it is client direction and your contract as you are not honouring rate either.

Interesting one this.

What are you doing while your sub is working YAB?

Is just negotiating an early end to your contract and get one set up with your sub not an option. Sounds like the option I would go for at the moment.

It's all playing with words I guess. Can you not call your sub - "sub" and call him "helper"? You don't have to be around him while he is helping you out on the project. As for the IR35 benefits, I guess helpers have the same effect as sub IMHO.

Dave.

[northernladuk]

But if the OP is paying the sub and has recruited the sub to do the work I can't really see what HMR&C's objection would be

The objection is he is not a sub. He is billed at a different rate and doing a different piece of work than that detailed in the contract. This can mean one of two things surely... client direction or he isn't a sub of that contract.

Are you saying what does it matter if he is a direct sub or not? I guess that is true but doing work not contracted is not a good place to be surely?

[LisaContractorUmbrella]

This sub stuff is great and we never get chance to discuss it but I think the alarm bells are going here.

Your sub well, kind subs you. But in this case he is doing a different piece of work, somewhere client direction has crept in here. Different piece of work, different rate. In the eyes of HMRC this is NOT your sub. It is your client getting a different piece of work done by a different person at a different rate. If not that it is client direction and your contract as you are not honouring rate either.

Interesting one this.

What are you doing while your sub is working YAB?

But if the OP is paying the sub and has recruited the sub to do the work I can't really see what HMR&C's objection would be

[northernladuk]

ClientCo is suggesting I charge lower for the days that only the sub would be onsite as he'll work on on a smaller piece of work and not be familiar with everything about the project.

I'm inclined to agree. But as pointed out in the thread, this does sort of mean that I don't invoice them the contracted rate.
It's like my company billing slightly less for a smaller piece of work but then I'm wondering if this might have other implications that I may not have fully considered...

This sub stuff is great and we never get chance to discuss it but I think the alarm bells are going here.

Your sub well, kind subs you. But in this case he is doing a different piece of work, somewhere client direction has crept in here. Different piece of work, different rate. In the eyes of HMRC this is NOT your sub. It is your client getting a different piece of work done by a different person at a different rate. If not that it is client direction and your contract as you are not honouring rate either.

Interesting one this.

What are you doing while your sub is working YAB?

Is just negotiating an early end to your contract and get one set up with your sub not an option. Sounds like the option I would go for at the moment.