Reply to: QDOS Contract failed CEST online test - where did I go wrong?

[WordIsBond]

OP is satisfied but since this may be useful to other people:

Does your client have the right to reject a substitute? Yes

As noted, this is huge. An unfettered right to substitution is not compatible with employment. If the client is willing to accept any qualified substitute, the answer here should be 'No' and should lead to an outside determination.

NOTE: A lot is made here of the difference between 'substitute' and 'subcontractor.' The CEST guidance gives no such distinction, FWIW.

Does your client have the right to move you from the task you originally agreed to do? No, that would require a new contract or formal working arrangement

Good. Don't fall for the trap of saying only if it is agreed. Agree with the client that you'll gladly agree the same terms but anything different needs to be in writing.

Does your client have the right to decide how the work is done? No, you and your client agree together

Too bad. If you can get this to "you decide" it will help a lot. Setting specs is NOT the client deciding how it is done, it is them telling you what they want to buy from YourCo.

Will you have to fund any other costs before your client pays you? No

Lots of discussion on this one already. If you have travel costs, you will incur them before the client pays you, unless the client pays them in advance. Thus, the answer should be yes. Similarly, if you work from home you will have home office costs before the client pays you. That said, answering yes to this question is unlikely to have any impact at all on the determination.

If the client was not happy with your work, would you have to put it right? Yes, unpaid and you would have extra costs that your client would not pay for

I'll just say that this one question shows how disgracefully biased CEST is. No employee, ever, anywhere, has to put things right unpaid AND incur extra unreimbursed costs to do so. This answer, alone, shows that this is not employment and should be an immediate outside determination, if the answer is accurate. Can you imagine how HMG would respond if an employee was required to work unpaid and incur costs to correct mistakes they'd made on the job?

Surely there must be some bright new MP somewhere that would scream about this question and demand a pause until HMRC fixes CEST.

Does the current contract allow for it to be extended? Yes

I would say that unless there is a specific provision allowing for it to be extended, this answer was a mistake. It gives the impression there is Mutuality of Obligation -- or at the very least, HMRC will interpret it that way.

And if there is such a provision in the contract, drop it. The contract does not have to allow for it to be extended. When the time comes, if it makes sense for you and the client, just agree a new contract, even if terms are identical.

Two things that are not equal:
1. The contract does not prohibit it to be extended.
2. The contract allows for it to be extended.

If the contract is silent on the matter, #1 is true, but #2 is not. #2 is only true if the contract says something like "this contract may be extended in such and such a way." If the contract says that you've brought MOO into the picture.

[Manic]

Well yes, stating the bleedin' obvious. If the reality doesn't match the results, HMRC will disregard CEST anyway.

We have a newbie here, needs to be obvious.

[sal]

All well and good when on boarding you. I wonder what they would really say when you pull it.

Do they really understand what is involved and do you. How do you think providing a substitute works. Might sound daft but all bet a vast majority of contractors don't get it.

Fortunately for use HMRC/IR35 is not looking for the RoS to be exercised in order to get you off the hook. Just for it to be existing and genuine.

I haven't heard of anyone having to exercise it ever, so it's rare enough.

Just point out to ClientCo that even if they don't have the right to refuse the substitute, they can accept it, then exercise their right to not provide work and terminate the contract.

I doubt anyone in their right mind will trigger a substitute clause for a week or two against ClientCo wishes to cover a holiday or w/e.

[malvolio]

All well and good when on boarding you. I wonder what they would really say when you pull it.

Do they really understand what is involved and do you. How do you think providing a substitute works. Might sound daft but all bet a vast majority of contractors don't get it.

And for those that don't, this post was made recently

[malvolio]

Assuming client agrees to the unfettered right of substitution of course.

Well yes, stating the bleedin' obvious. If the reality doesn't match the results, HMRC will disregard CEST anyway.

[northernladuk]

All well and good when on boarding you. I wonder what they would really say when you pull it.

Do they really understand what is involved and do you. How do you think providing a substitute works. Might sound daft but all bet a vast majority of contractors don't get it.

[Manic]

Good news and well done. Others take note...

I just went through the test again but changed the substitution answer to "Client will accept the substitute if suitably qualified etc." and it passed.

Why you are getting this result
Your answers told us:
your client has accepted, or would accept, a substitute
you or your business will have to fund costs before your client pays you
This suggests you are working on a business to business basis.

Thanks for the help and advice all.

Assuming client agrees to the unfettered right of substitution of course.

[malvolio]

I just went through the test again but changed the substitution answer to "Client will accept the substitute if suitably qualified etc." and it passed.

Why you are getting this result
Your answers told us:
your client has accepted, or would accept, a substitute
you or your business will have to fund costs before your client pays you
This suggests you are working on a business to business basis.

Thanks for the help and advice all.

Good news and well done. Others take note...

[dsc]

Beautifully inexact as ever...

"Non-commuting" is dependent on whether or not the gig is inside or outside IR35: inside means it is commuting, outside means it isn't...

What I think they are asking is "Have you add to pony up for materials, (in the widest sense) or equipment or tools or premises or relocation costs specifically to undertake this particular engagement". Since most of us already have working resources, the answer is probably no, but if you have to buy a particular toolset such as a specific compiler or something, then the answer would be yes. Where that leads the CEST decision is a whole other question...

However I still would argue that out here in the real world and not HMRC's Neverneverland that any operating business will have a contingency for such overhead costs and will aim to recover them from their fees. As such they are not intrinsic to one engagement but rather as a cost of doing business. Obviously that is my interpretation, others may well treat each gig as a separate financial transaction in its entirety.

Isn't this about whether you pay for whatever "tools" you need or if they are simply supplied by your client? the latter would of course push you more into "inside" determination, although I'd argue here as most projects "provide" all the kit as it's part of the release when the job is done.

[bigrob]

I just went through the test again but changed the substitution answer to "Client will accept the substitute if suitably qualified etc." and it passed.

Why you are getting this result
Your answers told us:
your client has accepted, or would accept, a substitute
you or your business will have to fund costs before your client pays you
This suggests you are working on a business to business basis.

Thanks for the help and advice all.

[malvolio]

Wooah hold on a minute. Check the wording.

Will you have to fund any other costs before your client pays you?
Worker’s financial risk
This can include non-commuting travel or accommodation, or external business premises for this work only.

Beautifully inexact as ever...

"Non-commuting" is dependent on whether or not the gig is inside or outside IR35: inside means it is commuting, outside means it isn't...

What I think they are asking is "Have you add to pony up for materials, (in the widest sense) or equipment or tools or premises or relocation costs specifically to undertake this particular engagement". Since most of us already have working resources, the answer is probably no, but if you have to buy a particular toolset such as a specific compiler or something, then the answer would be yes. Where that leads the CEST decision is a whole other question...

However I still would argue that out here in the real world and not HMRC's Neverneverland that any operating business will have a contingency for such overhead costs and will aim to recover them from their fees. As such they are not intrinsic to one engagement but rather as a cost of doing business. Obviously that is my interpretation, others may well treat each gig as a separate financial transaction in its entirety.

[Manic]

So I'm correct in saying that the OP would have to incur costs before they are paid by the client then?

I think the point of those questions is to help demonstrate financial risk, e.g. shelling out on a month's worth of accommodation and travel only to find out you don't get paid because they've used you for a month's free consultancy and good luck getting the money off them

Wooah hold on a minute. Check the wording.

Will you have to fund any other costs before your client pays you?
Worker’s financial risk
This can include non-commuting travel or accommodation, or external business premises for this work only.

[mudskipper]

Where is the spreadsheet mudskipper posted a few weeks ago?


Sent from my iPhone using Contractor UK Forum

CEST matrix - Google Sheets

[LondonManc]

Of course it involves costs. They are not normally a client liability, and would be factored into your rate anyway.

So I'm correct in saying that the OP would have to incur costs before they are paid by the client then?

I think the point of those questions is to help demonstrate financial risk, e.g. shelling out on a month's worth of accommodation and travel only to find out you don't get paid because they've used you for a month's free consultancy and good luck getting the money off them

[Lance]

It’s the “direct” contract between my Ltd and the client. We sat down together and went though the test for confirmation. I was under the impression that if the Substitution was in place then it’s a default pass - obviously not.

Tell them they should not have the right to refuse the substitute. If they have that right it's not a substitue it's a job candidate.