Reply to: Does one substitution protect me from IR35?

[jamesbrown]

As previously argued. Is this really substitution and not subcontracting? Either way it is great stuff for IR35 and shows a business has been run but this doesn't look like substituion to me. I make the same points that you still deliver the piece of work you were asked to do so you haven substituted anything, you have just brought in an extra person to provide input in to the final outcome. Being picky I know but interested to know.

FWIW, I had a contract flagged for that in a recent QDOS review; it had a completely unfettered right to subcontract/assign (without prior approval etc.), but there was insufficient detail on RoS, so I had to have that corrected.

[northernladuk]

Stuff

As previously argued. Is this really substitution and not subcontracting? Either way it is great stuff for IR35 and shows a business has been run but this doesn't look like substituion to me. I make the same points that you still deliver the piece of work you were asked to do so you haven substituted anything, you have just brought in an extra person to provide input in to the final outcome. Being picky I know but interested to know.

[FarmerPalmer]

I have just substituted.

I have a piece of work that needed specifying and developing.

I emailed client co and told them I wanted to invoke the substitution clause and get someone else to specify.

Told them how long it would take me, and that would be the maximum that it would take and they would be billed for, and that if the substitute did not complete to the clients satisfaction then my company would be liable to correct at my company's expense, as with all work, under terms of our current contract.

Told them that they would also get the work done faster as it would be done in parallel, and actually I was taking a few days off - which covered it expense wise for them.

Client was ok about it, trusted me to get the right person to do the work. The client did not know my substitute and still has not met them.

Agency took a bit more convincing - wanted a separate contract, but I assured them that it was covered by my company's existing contact, and a new contract would not be a substitution, and that was the clause in our contract that I wanted to test, to verify that we had a true business to business contract.

I liaised with the subcontractor and gave them everything they needed to complete the work.

Subcontractor didn't even meet client or visit site as my company's contract states that my company decides where the work is performed anyway.

Work was completed. Client is happy. Timesheet for subcontractor signed off, and paid to my company.

I'm just waiting for subcontractor to invoice me for his time.

[psychocandy]

I might be a bit thick but most clientcos I've contracted for would throw a bit a wobbler if I brought someone else in, surely they would need passes organising, laptop, network access etc, go on the pointless intro courses you sometimes get, do the mandatory training before doing any work.

I'm missing something I know!

Yep. Agreed. Wouldnt have it I reckon. No way in a million years. Which is not good for IR35 I know.

[TestMangler]

There are several scenarios where substitution will work and the client won't throw a fit. Two I can think of that don't cause issues:
1. You and another contractor work part-time at client co. You go on holiday and you get the other contractor to cover your separate work billed through your company.
2. You go on holiday and use another contractor who left recently on good terms with client co as your substitute who bills through your company.

In both these cases the sub would have gone through the client co's health and safety etc training. In the first case there is no issue about security. In the second case it depends on how "recently" the contractor left.

Scenario 2 was the one I used.

[SueEllen]

I might be a bit thick but most clientcos I've contracted for would throw a bit a wobbler if I brought someone else in, surely they would need passes organising, laptop, network access etc, go on the pointless intro courses you sometimes get, do the mandatory training before doing any work.

I'm missing something I know!

There are several scenarios where substitution will work and the client won't throw a fit. Two I can think of that don't cause issues:
1. You and another contractor work part-time at client co. You go on holiday and you get the other contractor to cover your separate work billed through your company.
2. You go on holiday and use another contractor who left recently on good terms with client co as your substitute who bills through your company.

In both these cases the sub would have gone through the client co's health and safety etc training. In the first case there is no issue about security. In the second case it depends on how "recently" the contractor left.

[stek]

Does the client need to know about a substitution. If I am billing for a day worked from my company premises, and someone else does the day and invoices my Ltd, am I am sorted for IR35?

I might be a bit thick but most clientcos I've contracted for would throw a bit a wobbler if I brought someone else in, surely they would need passes organising, laptop, network access etc, go on the pointless intro courses you sometimes get, do the mandatory training before doing any work.

I'm missing something I know!

[northernladuk]

Does the client need to know about a substitution. If I am billing for a day worked from my company premises, and someone else does the day and invoices my Ltd, am I am sorted for IR35?

Isn't that more like outsourcing rather than true substitution. Sub would be when someone else is provided to fullful your delivery obligations. By using someone else but the client doesn't see you are selling him a solution. It would be just as good if not better for IR35 IMO.

[Old Greg]

Does the client need to know about a substitution. If I am billing for a day worked from my company premises, and someone else does the day and invoices my Ltd, am I am sorted for IR35?

[northernladuk]

I just threw that in seems we were on the topic of substitutions. It could be that the OP's situation is theoretical and is something he wants to peruse so didn't see the harm in mentioning it. The more he learns about subbing, and not just his situation will help him understand there is no 'cast iron protection from being within IR35'

If we just want to spoon feed OP's the answer without making aware of stuff he might not know about. I mean, he wants to be outside yet if he offers a sub and his client says 'nah, don't like his shirt colour' he is actually going to put himself INSIDE IR35 so V important to know all he can IMO.

[TestMangler]

Agreed. Point taken.

However the rest of it is/may be relevant when you remember that only this contract is not caught. If he relies on the same tulip clause WITHOUT subsituting in the future or has relied upon it WITHOUT subsituting previously, he may well be caught for those other contracts. Hence, the case law is relevant.

Up to a point, agreed, but say, for example, the OP subs on this contract which has a restrictive clause and no upper contract substitution clause. HMRC would have a hard time convincing a court that a restrictive clause could be proven to be 'genuine' in one contract but not in the next (or previous for that matter).

I was taking to mean by the tone of the OP's post that he was going to sub, not that he wanted to know the theory of having a sub clause

[tractor]

..

Would one of you two advisors care to explain why the OPs substitution clause and upper contract substitution clause terms would matter here ?

He's talking about 'ACTUAL SUBSTITUTION' here, not a bunch of theory.

If he provides a substitute (in reality) then the clauses don't matter.

You guys want to get your noses out of the case studies and into the real world sometime...

Agreed. Point taken.

However the rest of it is/may be relevant when you remember that only this contract is not caught. If he relies on the same tulip clause WITHOUT subsituting in the future or has relied upon it WITHOUT subsituting previously, he may well be caught for those other contracts. Hence, the case law is relevant.

[Craig@Clarity]

As I mentioned above, The Hays contract I used had a completely fettered sub clause (written agreement of agency and client etc etc) and was normally flagged at IR35 review as being too restrictive to be genuine, but I still subbed against it, so the 'experts' can spout opinion all day long. If the OP uses a sub, regardless of how restrictive the sub clause is, then he's won the 'personal service' arguement for that contract.

Which is why a written contract with an agency can bear no relevance for "employment status" since it can have the whistle and bells on it in terms of "IR35 friendly" clauses or be completely silent. Either way, if you demonstrate in reality that you have used a sub, as you say, 'experts' can spout all the live long day

[TestMangler]

Did you get your contract reviewed by the likes of QDOS as well? There are a couple of points to be careful with around subs, particularly the amount of choice the client has to decline your sub.

WNLUKS plus the fact that the 'upper' contract (the agency/client) has to mirror the contract you have with the agency i.e that the subsitution clause exists and does not place additional constraints upon any approvals.

Would one of you two advisors care to explain why the OPs substitution clause and upper contract substitution clause terms would matter here ?

He's talking about 'ACTUAL SUBSTITUTION' here, not a bunch of theory.

If he provides a substitute (in reality) then the clauses don't matter.

You guys want to get your noses out of the case studies and into the real world sometime...

[BlasterBates]

In my view if you have used a substitute then any inspector aint going to dwell on your case. Theoretically there is no 100% protection against IR35, but using a substitute is as good as it gets.