Reply to: IR35 and your clients client.

[scooby]

Answer the questions

1) If the end client terminates the consultancy contract, does the consultancy have to find you another work?
2) If the consultancy asks you to work on another client, can you say refuse to accept the assignment?
3) Do the consultancy pays you in between assignments for just sitting in a corner of the office?

You pretty much get the idea now, I guess.

I like this definition. This heavily applies to me and new contract. the answer to 1&3 is no, 2 is yes. I've based my status (and written contract) on this.

My relationship isnt with the end customer.

[SueEllen]

If there was an IR35 investigation, I would expect HMRC to talk to the consultancy about the work that you did. I would not expect HMRC to talk to any of the 23 different clients of the consultancy.

Is there a law stopping talking to all 24 parties involved?

If there isn't, there is nothing stopping them talking to all 23 clients of the consultancy plus the consultancy though it would be time consuming and likely to be cost ineffective.

[LisaContractorUmbrella]

I agree.



I disagree. Any indication of employment has to come from your relationship with the consultancy - if they treat you as an employee, then you are in danger. If they don't, then I think that what their client thinks about you is irrelevant - they may think that you are an employee of theirs, an employee of the consultancy, or an independent, but since they aren't anything to do with the relationship, their opinion is worthless.

Take this scenario:

You have a contract to provide services to a consultancy company. They have a number of projects, and for the first two months, you provide services to the consultancy to work with one particular client. After that period, you agree with the consultancy to work on a different project (you could turn this work down, and they are not obliged to offer you work). The new project is another month with a different client of theirs. During the month, you also provide expert advice and guidance to a third client. After this, the next agreed work (which you could turn down) involves visiting a number of their customers and reviewing / installing the software - twenty different customers in total.

If there was an IR35 investigation, I would expect HMRC to talk to the consultancy about the work that you did. I would not expect HMRC to talk to any of the 23 different clients of the consultancy.

In your scenario the consultancy are finding work for you to do and it may say in the contract that there is no MOO but what is the reality - how many times will a consultancy offer work to an individual who keeps turning it down??

[rd409]

I don't think he was suggesting what you describe.

Hmm. I think I just confused myself with what he suggested, and what I faced when I worked for a consultancy. The contract was IR35 friendly, along with the working practice, but am just thinking about how it might be construed by HMRC if there was an investigation

As I said earlier, I might just be thinking too much into it.

[TheFaQQer]

But the issue is that the client here might just act as an agency, providing your services to various clients and making payments in a chain. I think that is what NLUK suggested in the first place.

You are clearly acting as a service providor to the consultancy.... but......... you are based on the clients site.

I don't think he was suggesting what you describe.

[rd409]

I think that there is a fundamental difference between

contractor > agency > agency > (agency n) > client

and

contractor > agency > agency > (agency n) > client > customer(s) of the client

But the issue is that the client here might just act as an agency, providing your services to various clients and making payments in a chain. I think that is what NLUK suggested in the first place. If you are working for a client on a project for one of their client, is different from you are working for one of the client of the consultancy. The later is just an agreement of supply between the consultancy and their client, which is very similar to the agreements between agencies and clients in most of the cases.

[TheFaQQer]

Having a second thought, I think, does this not equate to having multiple agencies in the loop. IR35 specifically checks for the relation between contractor and the end client. So if you have a relation like contractor - agency 1 - client, then IR35 checks for contractor - client relation. If there are multiple agencies as mentioned before, it should be checked again for contractor - client and not contractor - agency1 or agency n.

I agree.

If HMRC starts to investigate any permutation between multi level work contract assignments, then I am sure all the contractors will be IR35 caught, as at some level the client will think that you(the contractor) is a resource that belongs to their predecessor in the supply chain. This kind of blows my entire understanding of the IR35.

Or I may just be thinking too much in detail. Along with NLUK....

I think that there is a fundamental difference between

contractor > agency > agency > (agency n) > client

and

contractor > agency > agency > (agency n) > client > customer(s) of the client

[TheFaQQer]

Yes you absolutely could; there are any number of employment law cases where status is not determined by the contractual relationship. If you are being offered almost as 'bank' staff by the consultancy and they view your relationship as one of employer/employee and they dictate where and when you work then I think you may be considered by a court as an employee for employment law purposes.

I agree.

However, IR35 has now morphed into a tax law/employment law creature which is part of the reason it causes so many problems - regardless of your relationship with the consultancy, I think HMR&C would examine your relationship with the end client to determine whether you were inside or outside.

Just MHO

I disagree. Any indication of employment has to come from your relationship with the consultancy - if they treat you as an employee, then you are in danger. If they don't, then I think that what their client thinks about you is irrelevant - they may think that you are an employee of theirs, an employee of the consultancy, or an independent, but since they aren't anything to do with the relationship, their opinion is worthless.

Take this scenario:

You have a contract to provide services to a consultancy company. They have a number of projects, and for the first two months, you provide services to the consultancy to work with one particular client. After that period, you agree with the consultancy to work on a different project (you could turn this work down, and they are not obliged to offer you work). The new project is another month with a different client of theirs. During the month, you also provide expert advice and guidance to a third client. After this, the next agreed work (which you could turn down) involves visiting a number of their customers and reviewing / installing the software - twenty different customers in total.

If there was an IR35 investigation, I would expect HMRC to talk to the consultancy about the work that you did. I would not expect HMRC to talk to any of the 23 different clients of the consultancy.

[rd409]

Exactly - they aren't the end-client, they are the customer of your client.

Having a second thought, I think, does this not equate to having multiple agencies in the loop. IR35 specifically checks for the relation between contractor and the end client. So if you have a relation like contractor - agency 1 - client, then IR35 checks for contractor - client relation. If there are multiple agencies as mentioned before, it should be checked again for contractor - client and not contractor - agency1 or agency n.

If HMRC starts to investigate any permutation between multi level work contract assignments, then I am sure all the contractors will be IR35 caught, as at some level the client will think that you(the contractor) is a resource that belongs to their predecessor in the supply chain. This kind of blows my entire understanding of the IR35.

Or I may just be thinking too much in detail. Along with NLUK....

[LisaContractorUmbrella]

But we are drafted in by the consultancy to provide skills in to the project they do not have. Need to be careful with the client word. There is client of my LTD and client of the consultancy.

I am a specialised resource providing a service to the consultancy they do not have or cater for with permie staff so I am happy I am outside IR35. The next step is to be offered to their client as a permie of the consultancy. This is the bit that worries me... but I cannot be seen as a permie of the Consultancies Client cause I do work on behalf of the consultancy.

I guess the question is, can I be seen as a hidden employee of a company I have no contract or contractual/financial relationship to?

Yes you absolutely could; there are any number of employment law cases where status is not determined by the contractual relationship. If you are being offered almost as 'bank' staff by the consultancy and they view your relationship as one of employer/employee and they dictate where and when you work then I think you may be considered by a court as an employee for employment law purposes. However, IR35 has now morphed into a tax law/employment law creature which is part of the reason it causes so many problems - regardless of your relationship with the consultancy, I think HMR&C would examine your relationship with the end client to determine whether you were inside or outside.

Just MHO

[windowlicka]

Interesting discussion. My situation is MYco - Consultancy - Client A - Client B.

My day to day work is carried out for client B at their site, Im there as a representative of client A as far as they are concerned.

Ive never set foot in my consultancy office, infact Ive never even met them face to face or have any interaction with them apart from fill timesheets and invoice. Due to this fact I have never considered IR35 to be of any relevance to me.

I really cant see how you could be described as an employee of anyone you do not have a contract with and who your company does not invoice or receive payment from! I guess you can argue technical points until the sun comes up but there are much easier pickings out there..

[jamesbrown]

I don't see why. Surely the whole point of IR35 is that it identifies disguised employment; if you worked for client co 5 days a week, 7 hours a day, alongside permies doing the same job, no ROS, don't need to use own equipment etc then I would have thought that any contractual arrangements you have in place would be superseded by the fact that you would, in reality, be, to all intents and purposes, an employee.

It's an interesting question and I have an opinion (I'm not saying I'm certain). The point of IR35 was that HMRC could "look through" an intermediary arrangement and ask whether the contractor was a disguised employee and thus liable, as an individual contractor, for greater tax. If the working practices with the end client point to a relationship of employment, I think the contractor would be a disguised employee of the end client (disguised via the consultancy and contractor Ltd. Co. together). How many intermediaries are needed and how complex does the relationship need to be? One can think of many scenarios.

The basic question is whether a contract is needed as a prerequisite for disguised employment and what that contractual relationship must be. I don't think disguised employment relies on this. HMRC can cast aside a contract if it doesn't reflect working practices. One could also have a situation where the end client expects a particular contractor to do the work in a particular way (in the contract between them and the consultancy) even if the contract between the consultancy and the contractor Ltd. Co. is IR35 friendly.

[TheFaQQer]

I don't think the 2 agencies make a difference but it is the term 'end client'. He is not your end client though is he. Consultants Client is a better term. This is where my confusion lies.

Exactly - they aren't the end-client, they are the customer of your client.

If you weren't working at the customer premises, and there was an IR35 investigation, do you think that HMRC would talk to the customer of your client to find out what they think of you? Of course they wouldn't.

The contract is between your company (any intermediaries) and the consultancy. The fact that they then ask you to perform services for them to a particular client of theirs and based at a different location is irrelevant.

[northernladuk]

I don't see why. Surely the whole point of IR35 is that it identifies disguised employment; if you worked for client co 5 days a week, 7 hours a day, alongside permies doing the same job, no ROS, don't need to use own equipment etc then I would have thought that any contractual arrangements you have in place would be superseded by the fact that you would, in reality, be, to all intents and purposes, an employee.

But we are drafted in by the consultancy to provide skills in to the project they do not have. Need to be careful with the client word. There is client of my LTD and client of the consultancy.

I am a specialised resource providing a service to the consultancy they do not have or cater for with permie staff so I am happy I am outside IR35. The next step is to be offered to their client as a permie of the consultancy. This is the bit that worries me... but I cannot be seen as a permie of the Consultancies Client cause I do work on behalf of the consultancy.

I guess the question is, can I be seen as a hidden employee of a company I have no contract or contractual/financial relationship to?

[northernladuk]

Now you have got me thinking (i know; there is always a first time for everything) I have always thought i was way outside IR35 but am i ??

Ltd - Agency 1 - Agency 2 - Consultancy - end client

I don't think the 2 agencies make a difference but it is the term 'end client'. He is not your end client though is he. Consultants Client is a better term. This is where my confusion lies.