Reply to: Who has actually used the substitute clause? Especially in banks

[Snarf]

Virtually no-one as 99% of all substitution clauses in the contracts of IT Contractors are a sham. The most frequently used constraint is that of the client having the final say on the actual substitute used. Therefore, clients can simply reject any/all substitutes offered by the contractor's Ltd. for whatever reasons they desire, thus making the contractor's Ltd. having a "right of substitution" to be a sham since it effectively doesn't exist.

Real substitution clauses allow the contractor's Ltd. to be the final adjudicator on who the actual substitute may be. Of course, the contractor's Ltd. has to ensure that the substitute possesses the relevant skills for which the contractor's Ltd is responsible. However, such "genuine" substitution clauses in the contracts for one-man-band IT Contractors, and irrespective of the sector that the contractor is working in, are as rare as rocking horse sh*t!

I brought this up with qdos for an SC cleared role for the MoD a few years ago. I basically pointed out to them that although I could provide a subby the clearance and onboarding process would make it almost imposible to actually do it.

They said as long as the client was willing to agree that they would have no objections should a suitable subby be supplied that they would be happy with it from an IR35 review standpoint.

I got the client to confirm this in writing, highlighting the onboarding process that the subby would have to go through etc.

In the end I did use this, I brought in a subby to cover an extended holiday I took in 2016, he had previous experience with the client and was still scheduled cleared so came in for the three weeks which I paid him for... When I got back the client offered him a position and he stayed another 6 months...

So I guess whether the clause is actually useful depends on the client.

[MyUserName]

Roger thinks you should read a post properly before you comment on it.

No, he thinks you should read a post properly before commenting on it.

[jamesbrown]

It is only one point, Roger.

Roger thinks you should read a post properly before you comment on it.

[Old Greg]

OF COURSE it's only one point. DID I SAY IT WASN'T?

NOOOOO, I DIDN'T!!!!!

READ A POST PROPERLY before you comment on it!!!!!!!!!!!!!!!!!!!!

It is only one point, Roger.

[Batcher]

I did once.

I was busy on another contract so couldn't do it myself but I took the other contract and invoked the substitution clause. As I hadn't done any work my substitute was doing it from scratch too and the client didn't object.

The substitute was over here on a visa from India, had just finished beside me through a Managed Services company and needed to work.

He couldn't set up his own limited so I charged through my company, took care of VAT etc., took a cut for the business then paid him cash in hand

He's doing quite well now over in the States, he may even have citizenship.

[boxingbantz]

In these modern IR35 proof contracts we have the rights to provide substitute devs.

The tricky thing is that banks have complex onboarding process for even contractors, so I need to think if it's workable. Eg Disclosures and address checks + a million forms

Can anyone who has provided a substitute share their wisdom?

My client actually encourages it to cement the outside IR35 status I have been granted.

I probably won't, however.

[LondonManc]

OF COURSE it's only one point. DID I SAY IT WASN'T?

NOOOOO, I DIDN'T!!!!!

READ A POST PROPERLY before you comment on it!!!!!!!!!!!!!!!!!!!!

Calm down dear, you're in danger of a heart attack.

You're wrong though:
"HMRC have upped their game in recent years, and contractors who had passed IR35 years ago would in all probability not pass today."

[rogerthedodger]

WALOB.

That's one pointer to IR35.

Don't forget about the whole supervision, direction and control aspect.

OF COURSE it's only one point. DID I SAY IT WASN'T?

NOOOOO, I DIDN'T!!!!!

READ A POST PROPERLY before you comment on it!!!!!!!!!!!!!!!!!!!!

[LondonManc]

I've done it with a large consultancy on a project for the Scottish government. Wasn't an SC cleared role but they were happy with the whole arrangement - I brought in someone I knew and trusted to do the testing phase of the project for me.

Got me away from the boring stuff that I didn't want to do, got her some extra work, and the client was happy because it meant that it wasn't me checking my own work as they had thought it would be.

Manage the expectations and it's all good.

Spot on.

"I'm adding value because I'm bringing in an experienced tester who is also a fresh pair of eyes to carry out the testing (aka I'm going on holiday for three weeks, they're on the bench and I'm still getting £100 a day out of them being here) and I'll catch up with them when they've finished to iron out any issues."

[DeludedKitten]

I’ve done it. Not in banking but in the public sector (SC cleared gig) everyone was happy with the arrangement.

Just a bit of legwork to get logins and security signoff. But no more than a couple of hours work.

I've done it with a large consultancy on a project for the Scottish government. Wasn't an SC cleared role but they were happy with the whole arrangement - I brought in someone I knew and trusted to do the testing phase of the project for me.

Got me away from the boring stuff that I didn't want to do, got her some extra work, and the client was happy because it meant that it wasn't me checking my own work as they had thought it would be.

Manage the expectations and it's all good.

[SueEllen]

Out of interest how many times have you done this? Were there any issues with the client?

I've done it twice but my client wasn't in the banking sector.

Others I know have done it with a different client who was in public sector.

Personally I found it a hassle sorting out payments and keeping an eye on others work so haven't done it since. It's easier to keep an eye on someone's standard of work if they aren't your worker.

[LondonManc]

What a vast number of contractors do not seem to understand is that in an HMRC investigation, the tax inspector will be looking at what actually happens in practice, and this is much more important than what is in the written contract.

With regards to RoS, the fact of the matter is that you need to have an UNQUALIFIED RIGHT to substitute. This means you have to be able go to your client and say that you WILL be bringing in e.g. Fred Bloggs or Jane Smith to cover for you whilst you are on holiday or working with another client, NOT "is it OK if I bring in Fred Bloggs / Jane Smith". In other words, it's got to be TELL, NOT ASK!

In practice, only a very tiny percentage of one man band contractors would ever pass the substitution test (and quite possibly none at all), for the simple reason that they do not in practice have the unqualified right. This is irrespective of what the written contract says. In particular, any caveats in written contracts such as "request to substitute will not be unreasonably withheld" will automatically result in a fail, because such caveats immediately tell the tax inspector that permission had to be sought in the first place, and therefore there has been no unqualified right. Also, even if you have brought in a subby, that does not automatically mean you're bullet proof. If you've actually brought in a subby, but you've had to ask permission to do so, then it's a fail, because you haven't had the unqualified right. No client in his/her right mind, in practice, will allow a contractor to bring in a subby without prior approval, even if such approval is just a few simple questions

A tax inspector will talk to your clients, and will be trying to find out what happens in practice. Your clients will not want to be seen to be aiding and abetting tax evasion, and will therefore cover their backs by telling the tax inspector the truth, not telling the tax inspector what you want them to tell the tax inspector.

As a contractor, you are in practice engaged by a client because of your skills as an individual, not because Your Company Ltd is a renowned and reputable player in e.g. project managing xyz. That's why you send clients a CV rather than point them to the Your Company Ltd website.

HMRC have upped their game in recent years, and contractors who had passed IR35 years ago would in all probability not pass today.

WALOB.

That's one pointer to IR35.

Don't forget about the whole supervision, direction and control aspect.

[rogerthedodger]

What a vast number of contractors do not seem to understand is that in an HMRC investigation, the tax inspector will be looking at what actually happens in practice, and this is much more important than what is in the written contract.

With regards to RoS, the fact of the matter is that you need to have an UNQUALIFIED RIGHT to substitute. This means you have to be able go to your client and say that you WILL be bringing in e.g. Fred Bloggs or Jane Smith to cover for you whilst you are on holiday or working with another client, NOT "is it OK if I bring in Fred Bloggs / Jane Smith". In other words, it's got to be TELL, NOT ASK!

In practice, only a very tiny percentage of one man band contractors would ever pass the substitution test (and quite possibly none at all), for the simple reason that they do not in practice have the unqualified right. This is irrespective of what the written contract says. In particular, any caveats in written contracts such as "request to substitute will not be unreasonably withheld" will automatically result in a fail, because such caveats immediately tell the tax inspector that permission had to be sought in the first place, and therefore there has been no unqualified right. Also, even if you have brought in a subby, that does not automatically mean you're bullet proof. If you've actually brought in a subby, but you've had to ask permission to do so, then it's a fail, because you haven't had the unqualified right. No client in his/her right mind, in practice, will allow a contractor to bring in a subby without prior approval, even if such approval is just a few simple questions

A tax inspector will talk to your clients, and will be trying to find out what happens in practice. Your clients will not want to be seen to be aiding and abetting tax evasion, and will therefore cover their backs by telling the tax inspector the truth, not telling the tax inspector what you want them to tell the tax inspector.

As a contractor, you are in practice engaged by a client because of your skills as an individual, not because Your Company Ltd is a renowned and reputable player in e.g. project managing xyz. That's why you send clients a CV rather than point them to the Your Company Ltd website.

HMRC have upped their game in recent years, and contractors who had passed IR35 years ago would in all probability not pass today.

[MrButton]

I’ve done it. Not in banking but in the public sector (SC cleared gig) everyone was happy with the arrangement.

Just a bit of legwork to get logins and security signoff. But no more than a couple of hours work.

[billybiro]

In these modern IR35 proof contracts we have the rights to provide substitute devs.

The tricky thing is that banks have complex onboarding process for even contractors, so I need to think if it's workable. Eg Disclosures and address checks + a million forms

Can anyone who has provided a substitute share their wisdom?

Virtually no-one as 99% of all substitution clauses in the contracts of IT Contractors are a sham. The most frequently used constraint is that of the client having the final say on the actual substitute used. Therefore, clients can simply reject any/all substitutes offered by the contractor's Ltd. for whatever reasons they desire, thus making the contractor's Ltd. having a "right of substitution" to be a sham since it effectively doesn't exist.

Real substitution clauses allow the contractor's Ltd. to be the final adjudicator on who the actual substitute may be. Of course, the contractor's Ltd. has to ensure that the substitute possesses the relevant skills for which the contractor's Ltd is responsible. However, such "genuine" substitution clauses in the contracts for one-man-band IT Contractors, and irrespective of the sector that the contractor is working in, are as rare as rocking horse sh*t!