Reply to: Training course and IR35

[tractor]

HMRC: So what due diligence did you take to determine that your client was not directing or controlling you?
OP: I ask a bunch of random strangers on some public forum
HMRC: Case closed!

Clearly the use of italics to denote irony was wasted

Thanks to the OP for clarifying it.

I believe it is as much the responsibility of the revenue to prove direction and control or due diligence as it is for the contractor otherwise IR35 cases would never end up at the tribunal/courts.

The OP is clear in that he is not being directed to do this. Indeed the fact that the Client has offered this as a option which the OP is FREE to walk away from if he so chooses clearly demonstrates the opposite of D & C.

Furthermore the only reference to D & C that I can find on the HMRC guidance is that d & C is assumed where the client can move you where they wish to cater for changing priorities. The lack of any clarification or examples in the new IR35 test scenarios shows I think that they know how difficult it is to prove D & C (or they are being deliberately obtuse so as not to advertise how to circumvent that part of the legislation).

I have spent some time searching and can find no evidence of D & C being instrumental in a case loss except for the part & parcel aspect which is another whole can of worms but very much less ambiguous i.e in some circumstances it is quite easy to determine status from the part and parcel test.

Next steps for the OP? I would ask for a contract change to cover this aspect of delivery without including the training aspect, have the draft contract reviewed (there is the due diligence I was alluding to , The contract review will cost just over £100 quite cheap for additional free training and belt and braces comfort, I think.

If the review comes back positive then go for it. the other points about revenue and profit that the OP makes are equally valid and form part of any potential defence.

[ItContractor123]

Thanks for all the advice and as is usual in these cases it’s never black and white. Nothing further has been said on it today and it was only mentioned by the client in passing. I don't know any more details with regards to funding etc. at the moment.

I won’t just do as the client says hence posting on here for advice. I haven’t been directed to do it and I can obviously just say it isn't something my business can or will offer. However I believe it will benefit my business so to provide a bit more info:

The project I have been contracted to deliver is a short term project (3mth contract) and as is normally the case the scope of it has changed.
With regards to the front end development 2 options exist
1. Use an external consultancy to provide the end to end solution

2. Produce the solution in house using the discussed front end development tools

Now from the clients perspective 1 is more expensive and is the least preferred at the moment as the project is also an interim solution. With regards to 2 then the general consensus before I started on the project was to get a different internal team to develop large parts of the front end. The problem is that they don’t really have the required resource to meet the tight time constraints. A possibility for point 2 is to try and get other contractors in who do have the necessary skill set but again it needs to be Live in < 3mths so this might also be tight.

Now as a business I want to maximise the value to shareholders so if my company can offer a greater level of expertise in a wider area then surely it is beneficial to the company.
If the company can offer end to end solutions rather than backend development it increases the likelihood of increased revenues in the future.

With regards to the current project if my business could help with point 2 it means the projects chances of success will be much greater. Now a happy client means a greater chance of repeat business so again its a sensible business decision.

With regards to who pays for the course etc. then to maximise the value to shareholders if the client is willing to pay isn't this something that is again a sensible business decision.

As the scope has changed could the cost of the course regarded as payment for contract alteration/extra services. Again the business could pay and then invoice the client direct.

With regards to due diligence surely asking a large variety of your peers/competitors would count towards due diligence.
If I want to research and do due diligence on a holiday I would via the internet, on forums and trip advisor etc so If I want to research a potential business decision I would see what other similar businesses have done in similar circumstances.

What other areas is it worth pursuing in terms of due diligence. I could ask accountant/solicitors etc. but again I just imagine this will be expensive and everyone will have a different opinion.

T

[northernladuk]

HMRC: So what due diligence did you take to determine that your client was not directing or controlling you?
OP: I ask a bunch of random strangers on some public forum
HMRC: Case closed!

Again a dose of +1 to kingcook. The comment about the half full and half cup is a very valid one indeed but rememeber HMRC's cup will be nearly empty! You are not having to justify it to yourself, you have to justify it to someone who wants to rip you to shreds and has the money to do so. Am sorry but asking a question on a forum proving you are unable to make a simple business decision is NOT due diligence.

There maybe much more to this we haven't seen but from the evidence in this post it looks pretty black and white to me.

[kingcook]

He didn't

He sensibly came here and asked for advice. I would consider that as due diligence which passes yet another test.

HMRC: So what due diligence did you take to determine that your client was not directing or controlling you?
OP: I ask a bunch of random strangers on some public forum
HMRC: Case closed!

[tractor]

..

This is true but I wonder how many new contractors (his first contract) and in fact older heads would look at it this way or just do as the client says.

He didn't

He sensibly came here and asked for advice. I would consider that as due diligence which passes yet another test.

[northernladuk]

He has been offered an opportunity. If he takes it, he maximises his turnover and hopefully profit. He is most certainly not being directed to do it. As long as this is all documented and perhaps the contract changed to facilitate a new piece of work, I don't see any issue. I think the differences in our perception are those of cup half empty or cup half full.

This is a commercial decision he is considering, not an order to do something.

This kind of dilemma is one of the fundamental reasons why IR35 as implemented is a crock!!

This is true but I wonder how many new contractors (his first contract) and in fact older heads would look at it this way or just do as the client says.

[tractor]

...

You are correct, they would negotiate a new contract with defined deliverables and charge the earth for it. This is very different to being asked to do an extra bit of work outside the scope of your existing contract. What accenture wouldn't do is allow their guys to be drafted in to ad-hoc bits of work as the client requires willy nilly.

I see nothing here that is the OP doing anything to maximise his situation. He is going to do a bit of work the client wants to do. That is why we have client control clauses to differentiate what the OP is doing and what a business would do IMO.

He has been offered an opportunity. If he takes it, he maximises his turnover and hopefully profit. He is most certainly not being directed to do it. As long as this is all documented and perhaps the contract changed to facilitate a new piece of work, I don't see any issue. I think the differences in our perception are those of cup half empty or cup half full.

This is a commercial decision he is considering, not an order to do something.

This kind of dilemma is one of the fundamental reasons why IR35 as implemented is a crock!!

[northernladuk]

It's a question of perception. Developing an opportunity to maximise business/corporate earnings is not D & C.

We are always being told to think big - what do you think Accenture would do in these circumstances? Turn the business away? Not on your nellie!.

You are correct, they would negotiate a new contract with defined deliverables and charge the earth for it. This is very different to being asked to do an extra bit of work outside the scope of your existing contract. What accenture wouldn't do is allow their guys to be drafted in to ad-hoc bits of work as the client requires willy nilly.

I see nothing here that is the OP doing anything to maximise his situation. He is going to do a bit of work the client wants to do. That is why we have client control clauses to differentiate what the OP is doing and what a business would do IMO.

[tractor]

...

It's a question of perception. Developing an opportunity to maximise business/corporate earnings is not D & C.

We are always being told to think big - what do you think Accenture would do in these circumstances? Turn the business away? Not on your nellie!

And training in a different front end to work with the same back end is line of business training in my book.

Do it. Charge for it. Document the reasoning including the cost/benefits (on the back of a fag packet if you must). Then you are prepared if the unthinkable happens. Simply by demonstrating that you have applied some commercial thinking in it all should render it outside IR35. IMHO of course.

[northernladuk]

@ kingcook + northern lad

Sounds like a bit of a paranoid scenario to me. Consider the case - I just had a bit of my house rewired. I was really happy with the workmanship and the finish.

I said to the sparky, "You did an awesome job, could you run a bunch of networking cables for me?"
"Well I can, but I don't know how to terminate them properly."
"Ok here's some instruction on how to do it."

How is that different to what's being described? He's not being forced into the work. It's being offered - at least that's how it reads.

I don't think pointing something out to the OP that he may not be aware of is paranoid, particularly when the potential fall out could be quite serious (although chance of it happening is miniscule to be fair).

What you are are describing there is a clear case of client direction so a very big flag for IR35. Couldn't have put it better myself so I think both our points are very valid.

[malvolio]

Of course your business can pay for training for new skills. You are running an IT business, you can have any IT related training regardless of it being new or extending existing knowledge.

Yes you can. Snag is, you can't offset it against CT unless it is directly in your existing line of business. Picking up a new language is out, but updating your existing knowledge of one is OK. Stupid but true.

[escapeUK]

Your business can't pay for training for "new" skill(s).... if you're enhancing some level of knowledge that you already have, then you can.

Of course your business can pay for training for new skills. You are running an IT business, you can have any IT related training regardless of it being new or extending existing knowledge.

[Mr.Whippy]

If you think it would make good business sense to acquire the new skills then why not stipulate that your business will pay for the training and any costs incurred and that you will not charge the client for any time spent at the training.

Your business can't pay for training for "new" skill(s).... if you're enhancing some level of knowledge that you already have, then you can.

[FarmerPalmer]

If you think it would make good business sense to acquire the new skills then why not stipulate that your business will pay for the training and any costs incurred and that you will not charge the client for any time spent at the training.

[b0redom]

@ kingcook + northern lad

Sounds like a bit of a paranoid scenario to me. Consider the case - I just had a bit of my house rewired. I was really happy with the workmanship and the finish.

I said to the sparky, "You did an awesome job, could you run a bunch of networking cables for me?"
"Well I can, but I don't know how to terminate them properly."
"Ok here's some instruction on how to do it."

How is that different to what's being described? He's not being forced into the work. It's being offered - at least that's how it reads.