Reply to: Substitution advice

[xchaotic]

Do report back to us on how this goes.

I am looking into something similar - there's a lot work coming up and the permies in my co are starting to look for options how to deal with the load.
What I am hoping to offer is a service/solution, where they don't have to deal with the resourcing etc, just pay me more money and I magically get more done (through subcontracting).

[sheik yerbouti]

It's staring to look like your contract is not a-typical compared to most contractors, so perhaps you have a better chance. Still going to be extremely difficult though.

Well i'd say it's about time contractors took the agencies on with these clauses.

[The Wikir Man]

So I suppose we get back to my original question! "Would I have legal grounds to sue if they deny my right of substitution"?

Possibly.

[centurian]

I was also advertising the rate as £6 p/h below what I was getting!

That's good for IR35 - it shows that you're making a profit on the transaction - you're operating as a business. Of course, advertising it is one thing - it's getting the substitute in place that's the key.

The client has signed up for x amount of days work at £x, so I would have a right to sue them for this if they renaged on the contract in any way

Ah, that's not so good for IR35. It creates Mutually of Obligation.

So I suppose we get back to my original question! "Would I have legal grounds to sue if they deny my right of substitution"?

It's staring to look like your contract is not a-typical compared to most contractors, so perhaps you have a better chance. Still going to be extremely difficult though.

However, I would say do you really want the hassle of putting in the substitute. If they screw up, you could be liable. If they don't turn up - it's back down to you again.

If they've offered you an early exit - and that's what you wanted in the first place, I'd say take it...

[SueEllen]

So I suppose we get back to my original question! "Would I have legal grounds to sue if they deny my right of substitution"?

.

Your best bet would be to get the advice of a lawyer who specialises in commercial contract law rather than to take the advice of people on a forum.

A good solicitor would try and get the issue sorted out without dragging it through the courts. As taking it to court would cost you time and money which could be better spent elsewhere.

Also the only company you would be taking to court would be the agency as your written contract is with them not the client. If the agency isn't large then there are numerous tricks they can use to get out of paying you any money if you do end up in court and win.

[centurian]

Who cares what he likes, only what is legal. He likes us to pay NI, but I bet hardly any of us does.

Because I bet that avoidance laws are sufficiently wooly to allow HMRC to apply them as they see fit - actually most laws are like that. What's actually legal is decided by courts in interpreting laws.

So if they think you're avoiding VAT through the use of 2 separate LtdCo's, then there is no single act of parliament that specifically prohits this. But there would probably be an overarching law that HMRC could apply their case to.

A good example outside the realm of taxation is "Driving without Due Care and Attention" which can cover a multitude of things. In particular this was used to prosecute people for using mobile phones when driving - despite the fact that hardly any mobile phones existed in 1988, when the act became law. "Phone-driving" is now a separate offence though.

[Drewster]

Who cares what he likes, only what is legal. He likes us to pay NI, but I bet hardly any of us does.

I know someone who forms as many companies as he is doing specific areas, give them all diff bank accounts etc

Linux consulting
Windows consulting
Support

etc etc

Fair enough - poor choice of words....

If your "friend" is running multiple companies and keeping each of their turnover "low" to avoid paying VAT (because they are each below the "limit") then I believe what he is doing is illegal.
I suspect that if Hector looked at him in any realistic way they would nail him to a cross for what he is doing because the only point of his multiple companies is to avoid paying tax (VAT).

(I think) It is possible (legal) to run two or more entirely different companies doing entirely different things in this way eg A Flower Shop and an IT Co.

But "Windows Consultancy" and "Linux Consultancy" are too close for comfort to raise any credible argument that they are independent.

IANAA & IANAL so I may well be wrong and your "friend" is free to make his own risk decisions but it looks dodgy to me.....

[sheik yerbouti]

But tying to insist on the letter of any contract usually means that the other side then makes equal demands on the letter of the contract - which is the point when you realise that the contract is highly weighted in their favour (i.e. they can effectively dismiss you instantly without payment).

I think it is worth highlighting what happened when I last tried to leave.

I said I was leaving, and was told by the client and the agency that they would enforce the contract, ie: keep me in the contract to the end.

It was at this point that I studied the contract and decided to use my right of substitution. I informed the agency of my intentions who I believe initially paid lip service to my demand, until I put an advert on Jobserve and interviewed various prospective substitutes. I was also advertising the rate as £6 p/h below what I was getting!

When I got to this stage, the agency and the client started to have various meetings regarding this, along with the contracts dept. for this particular company. I remember getting a call on my mobile whilst on holiday stating that "the client had decided on this occasion to allow me to end the contract early". I stated that I was not interested in this and that I had already interviewed a replacement who would be working through my company. I was to put them through the inductions required at my expense and stay on site until they were au faux enough to be left on their own, so there would be no difference in service. The agent then went back to the client (they had many face to face meetings on this). The agency then had a telephone chat with my prospective substitute and they were booked in for a chat with the client.

I would have though that if there was a clause in the contact which would negate the substitution clause, then they would have played it much earlier in the game. As they didn't after so many meetings etc, shows no such exit clause exists. The client has signed up for x amount of days work at £x, so I would have a right to sue them for this if they renaged on the contract in any way (as they explained they could do to me if I left the position initially).

As I have documented evidence of the above, I would think I am 90% there in regards to showing the right exists for IR35 purposes.

So I suppose we get back to my original question! "Would I have legal grounds to sue if they deny my right of substitution"?


Many thanks for all the replies so far.

[centurian]

People seem to be thinking i'm doing something wrong here! If a clause is in a contract then, window dressing or not, it is a clause and enforceable.

You're not doing anything "wrong" per se - but do try and understand that the clause can be window dressing to some degree, largely because there are other clauses that can render your ROS impotent.

So while you can execute your contractual right to substitution and insist on the letter of the contract - don't be shocked if they turn around and execute other clauses in the contract.

Don't get me wrong. If you work with the client, you may be able to execute a ROS quite successfully. Would be a slam dunk win in the case of an IR35 enquiry.

But tying to insist on the letter of any contract usually means that the other side then makes equal demands on the letter of the contract - which is the point when you realise that the contract is highly weighted in their favour (i.e. they can effectively dismiss you instantly without payment).

[escapeUK]

Hector doesn't like it very much if you try to run several Co just under the VAT threshold (particularly if they do "the same thing")..... in fact he doesn't like it at all (and it's actually understandable......)

Who cares what he likes, only what is legal. He likes us to pay NI, but I bet hardly any of us does.

I know someone who forms as many companies as he is doing specific areas, give them all diff bank accounts etc

Linux consulting
Windows consulting
Support

etc etc

[sheik yerbouti]

Thanks for the replies!

People seem to be thinking i'm doing something wrong here! If a clause is in a contract then, window dressing or not, it is a clause and enforceable.

Like I said, I wanted to leave but the client effectively blocked it. There is no notice period, whatsoever. I cannot leave, and they cannot get rid of me - seriously, it is that set in stone.

The company were certainly going to accept a dubstitute before - I interviewed a replacement, the agency checked them out and they were going to be vetted by the client - it was that close. Whether I actually went through with it is irrelevant.

If I was to sue - i'd represent the company myself - if I lost I would just wind it up - no lose situation - only a loss situation for the agency.

[d000hg]

Write a formal letter to either the agency/client (or both) stating you will no longer be available from X but are planning to provide a replacement of equal skill, and will work alongside them from period X-Y -> X at no extra cost, and will be available over the phone to help the replacement get up to speed at minimal delay.

[Drewster]

Wouldnt you just form a second ltd company?

Hector doesn't like it very much if you try to run several Co just under the VAT threshold (particularly if they do "the same thing")..... in fact he doesn't like it at all (and it's actually understandable......)

[escapeUK]

VAT registration threshold is £70k turnover. So, if you go get another contract that brings in £36k or more, and you have a substitute where your bill to the client is £34k or more, then you need to register for VAT as you'll be over the threshold.

Wouldnt you just form a second ltd company?

[centurian]

Additionally, as I said in the second post, if you attempt to make a substitution, and the client refuses, this would also help point to you being inside IR35.

That is an important point because it could end up costing 1000s.

You can always argue an unused ROS clause as being perfectly executable. A rejected ROS leaves you "holed beneath the waterline".