Reply to: Trading on a PO basis without formal contract?

[Wanderer]

I set my own hours, and complete work away from the client's office. I am working from high level deliverables and have complete freedom to deliver these as I consider appropriate (indeed, the ability to deliver without being babysat and micromanaged is why they want me)

on the substitution, I asked (just as a courtesy) whether they were happy with me getting a cisco guy I know to do some of the network design... and I quote "I want on time, on budget and works. I don't care if you use an army of flying monkeys..." I have subbied a couple of small bits of work so far, and expect to do some more by the end of this. My company pays this, there's no pass through to the client for subbied work.

You are definitely on the right track here. Subcontracting work isn't a silver bullet to IR35 but it's a pretty strong pointer and it sounds like the client understands that you are now running a consultancy business rather than working for them as a permie. I can't t think why HMRC would be that bothered with people doing short contracts. It's the permietractors who spend 5 years at the same client taking > £100k/year that are the big earners for them. Someone who does 3 or 6 months and subcontracts work isn't going to be an easy win for HMRC so hopefully they will pick their battles and look elsewhere.

Look at the test cases so far - weren't they all long term contracts, years not months.

[northernladuk]

Interesting stuff and have to admit this isn't the understanding I have and to be honest, TM's experience aside it doesn't look right at all, particularly from the 'gut feeling' the OP wanted.

In a perfect world where all factors are changed to the n'th degree I could see how this might pass a legal challenge but the reality must be completely different.

The OP is blatantly continuing his job under a different financial arrangement. Don't try and tell me otherwise. They wanted him to leave so they gave him a day rate and he bill...i.e. he doesn't leave so job is same. The client will have no interest in making up stories to suit him. Remember the JLJ case where the client effectively shafted him by just saying as it was. The best he can expect is for them to say 'as per contract'... which he doesn't have.

How can he then not be regarded as an employee of the company in that situation?

I agree from the comments the OP is going the right way about a difficult situation but talk about being on the front line. This is the type of case that is clearly defined by IR35 and is going to take one hell of a bit of wangling to make safe surely? Legislation and technicalities aside as you will have to be stood in court to be going through those and that point it is too late... Gut feel?

As I say it does appear we on the board have an uninformed opinion of IR35 and yes it may be a piece of crap but it can't be so bad that something cutting this close will get past?

This just doesn't sit right at all, uniformed or not. It's waving a red rag to a bull however well it is pulled off.

All that aside if the OP want's to be a contractor why don't you leave your cotton wool environment and go do it properly?

[tractor]

...

Sorry matey, got to disagree. Not anywhere in the legislation is that mentioned as a particular case.

Quote: The Intermediaries legislation was introduced on 6th April 2000. It was first proposed by the Chancellor in the 1999 Budget and details were given in the Budget press release numbered IR35. Following extensive consultation, revised proposals were announced in a new press release dated 23 September 1999. However, the legislation is now commonly referred to as ‘IR35’.

The aim of the legislation is to eliminate the avoidance of tax and National Insurance Contributions (NICs) through the use of intermediaries, such as Personal Service Companies or partnerships, in circumstances where an individual worker would otherwise -
• For tax purposes, be regarded as an employee of the client; and
•For NICs purposes, be regarded as employed in employed earner’s employment by the client.

No mention of Brown's Friday/Monday sydrome, which was a soundbyte rather than a piece of legislation or guidance, used to put some kind of populist reasoning behind this pile of bollocks.

Someone moving from an employee to a consultant/contrtactor is subject to the same tests and case law as you and me are.

I would content, from experience, that a properly worded purchase order stands a better chance than a normal contract of being supportable as outside IR35.

This is absolutely correct and it was announced in that fashion to drum up support for poor legislation against the nasty tax dodgers. IIRC it was where the oft used phrase 'pay your fair share' really started up.

The actual legislation has no reference to it but remember HMRC will still use that kind of emotive language when trying to convince you that you are inside. Resist it at all costs.

IMO the OP is going absolutely the right way about it and a PO arrangement would probably have to be tested at court, however the presence of PGC membership and associated insurances is likely to be a combination that diverts them to easier fodder anyways.

NLUK is just flouncing because he didn't get to drive the torch in a speedboat down the Thames yesterday.

[Contreras]

Firstly, a PO is a "formal contract".

That is, once you accept it, which you have done by turning up on site.

Only problem with the way you have done it is that the contract terms default to those of the client, and not your terms of business. You can negotiate to have stuff changed, but it can be a PITA for the client to do this.

Alternatively you could use PCG's template Letter of Engagement and the associated (single page) Terms of Business.

Issue them a quotation using the LoE as a template and give it a quote reference no. and attach the ToB. To accept the quote and your terms, "all" they need to do is issue you with a PO which references the quote no. (without modifying or introducing any new requirements!)

Hey presto you have the job requirements enshrined in an IR35 compliant contract, and HR off your back. Simples!

(a bit more detail in the post here.)

[jamesbrown]

How can you say it is 'unlikely that someone would change their working practices so fundamentally as to justify that transition from ex-employer to client' ?

Did you read what the O/P said above about his working practices ?

If I could be arsed, i'd write a big explanation about the sequersnce of events of an IR35 case, for the people on here who regularly advise on it without knowing how it works.

Keeping it short and simple, HMRC would struggle to get out of the blocks as their first point of attack is the clauses in your contract that the OP is not subject to as he is on a purchase order. They will then attack your 'pointers to self employment' by sending questions to your client to answer, in writing, with the questions loaded at making the client say things along the lines of "Oh yes, joe contractor is just like all our other employees when it comes to working hours, calling in sick, parking etc etc" so having a clued up client is critical here, and the OP would appear to have one. They will then use that client evidence to counteract pointers to self employment, therefore destroying your case. For example, contract might say "The supplier has the right to send a substitute". Your client, when asked, might say there is no way you could send a substitute. Score 1 to HMRC.

The O/P has the same chance of surviving IR35 as we all do. Score a minus for being at ex employer, score a plus for working on a P.O. in which he's not named and has no 'working conditions' in it's T&Cs.

Typed after reading one of your posts and before reading the subsequent post from the OP I agree that there are some positive pointers in the working practices afterall, but I did say it needed more info. about the working practices. However, I disagree on the purchase order, it simply leaves more things unspecified/subject to evaluation of the working practices. Ultimately, all we can do here is offer opinion based on the limited info. provided and extra caution is needed in the situation described by the OP, so they would indeed do well to get everything checked out, and make sure their client is on the same page.

[cojak]

You know what mate...

That crosses the line from "telling it like it is" into just personal abuse. out of order.

And I agree, out of order NLUK.

[TestMangler]

True, TM, but it's unlikely that someone would change their working practices so fundamentally as to justify that transition from ex-employer to client unless they knew a lot more about the legislation to begin with. Being "part and parcel" is an important factor afterall. But, technically, you're right that more info. about working practices is needed.

How can you say it is 'unlikely that someone would change their working practices so fundamentally as to justify that transition from ex-employer to client' ?

Did you read what the O/P said above about his working practices ?

If I could be arsed, i'd write a big explanation about the sequersnce of events of an IR35 case, for the people on here who regularly advise on it without knowing how it works.

Keeping it short and simple, HMRC would struggle to get out of the blocks as their first point of attack is the clauses in your contract that the OP is not subject to as he is on a purchase order. They will then attack your 'pointers to self employment' by sending questions to your client to answer, in writing, with the questions loaded at making the client say things along the lines of "Oh yes, joe contractor is just like all our other employees when it comes to working hours, calling in sick, parking etc etc" so having a clued up client is critical here, and the OP would appear to have one. They will then use that client evidence to counteract pointers to self employment, therefore destroying your case. For example, contract might say "The supplier has the right to send a substitute". Your client, when asked, might say there is no way you could send a substitute. Score 1 to HMRC.

The O/P has the same chance of surviving IR35 as we all do. Score a minus for being at ex employer, score a plus for working on a P.O. in which he's not named and has no 'working conditions' in it's T&Cs.

[TestMangler]

Thanks for that mate. I posted because I wanted to know what people thought, not to open myself to internet abuse.

Clearly, yes, I'm only sharing a small part of the situation (and for what it's worth, have engaged a lawyer specialising in IR35 - this question was for just getting a "gut feel" from people working in the industry rather than a legal perspective)

I guess there are several opinions about this - the first guidance I had was that 20-30 days would not raise HMRC's ire too badly, but anything beyond that would start to raise the profile and risk.

The P/O issued does not name me personally, and is for days called off for the delivery of a specific project, rather than "work as directed".



indeed. Previously, I worked under control as you describe. Since coming back as a contractor, I do not. I set my own hours, and complete work away from the client's office. I am working from high level deliverables and have complete freedom to deliver these as I consider appropriate (indeed, the ability to deliver without being babysat and micromanaged is why they want me)

on the substitution, I asked (just as a courtesy) whether they were happy with me getting a cisco guy I know to do some of the network design... and I quote "I want on time, on budget and works. I don't care if you use an army of flying monkeys..."

I have subbied a couple of small bits of work so far, and expect to do some more by the end of this. My company pays this, there's no pass through to the client for subbied work.



THanks for the advice - It all goes in the pot and helps.

No problem matey. Looks to me like you are going about things the right way. My opinion will no doubt find itself in the minority camp on a lot of IR35 issues on CUk, but thats normally got something to do with actually having a f###ing clue what i'm talking about

[jamesbrown]

True, TM, but it's unlikely that someone would change their working practices so fundamentally as to justify that transition from ex-employer to client unless they knew a lot more about the legislation to begin with. Being "part and parcel" is an important factor afterall. But, technically, you're right that more info. about working practices is needed.

[TheoJones]

Sorry NLUK, this is just not true.

I've raised this several times in the past, but to much 'advice' is given out by people who don't actually know anything about the reality of an iR35 enquiry (and I don't just mean you !!)

To the O/P.....a lot depends on what is actually written on your purchase order. Are you named personally ? (a bad thing)

Thanks for that mate. I posted because I wanted to know what people thought, not to open myself to internet abuse.

Clearly, yes, I'm only sharing a small part of the situation (and for what it's worth, have engaged a lawyer specialising in IR35 - this question was for just getting a "gut feel" from people working in the industry rather than a legal perspective)

I guess there are several opinions about this - the first guidance I had was that 20-30 days would not raise HMRC's ire too badly, but anything beyond that would start to raise the profile and risk.

The P/O issued does not name me personally, and is for days called off for the delivery of a specific project, rather than "work as directed".

A lot more info about your current way of working before any guidance could be given. Are you working normal days/hours under control of a manager or can you do what you want, when you want ?

indeed. Previously, I worked under control as you describe. Since coming back as a contractor, I do not. I set my own hours, and complete work away from the client's office. I am working from high level deliverables and have complete freedom to deliver these as I consider appropriate (indeed, the ability to deliver without being babysat and micromanaged is why they want me)

on the substitution, I asked (just as a courtesy) whether they were happy with me getting a cisco guy I know to do some of the network design... and I quote "I want on time, on budget and works. I don't care if you use an army of flying monkeys..."

I have subbied a couple of small bits of work so far, and expect to do some more by the end of this. My company pays this, there's no pass through to the client for subbied work.

When I had my IR35 case a few years ago, I had a call off contract from HDS buying 144 days of MyCo and it was 'not considered' during the investigation. Only 'normal' client/agency/contractor arrangements were investigated.

To the OP, I would advise getting professional advice. IR35 was originally 'aimed at people leaving employment on Friday and returning as a contractor on Monday' but these words only ever appeared in Brown's budget speech, not in the legislation. (AFAIK). A professional advisor will be able to analyse the situaltion and advise without spouting tulip.

Good luck with it, but resist the move to a standard contract at all costs.

THanks for the advice - It all goes in the pot and helps.

[TestMangler]

Agreed. You are quite correct in your points as IR35 is so complex and open to interpretation but the fundamental point is about the difference about being permie and contractor. Changing the way your employer pays you and nothing else is about as basic as IR35 gets. Many situations can be argued but there are not many that are as black and white as this one.

Sorry matey, got to disagree. Not anywhere in the legislation is that mentioned as a particular case.

Quote: The Intermediaries legislation was introduced on 6th April 2000. It was first proposed by the Chancellor in the 1999 Budget and details were given in the Budget press release numbered IR35. Following extensive consultation, revised proposals were announced in a new press release dated 23 September 1999. However, the legislation is now commonly referred to as ‘IR35’.

The aim of the legislation is to eliminate the avoidance of tax and National Insurance Contributions (NICs) through the use of intermediaries, such as Personal Service Companies or partnerships, in circumstances where an individual worker would otherwise -
• For tax purposes, be regarded as an employee of the client; and
•For NICs purposes, be regarded as employed in employed earner’s employment by the client.

No mention of Brown's Friday/Monday sydrome, which was a soundbyte rather than a piece of legislation or guidance, used to put some kind of populist reasoning behind this pile of bollocks.

Someone moving from an employee to a consultant/contrtactor is subject to the same tests and case law as you and me are.

I would content, from experience, that a properly worded purchase order stands a better chance than a normal contract of being supportable as outside IR35.

[northernladuk]

Sorry NLUK, this is just not true.

<and other stuff>

Agreed. You are quite correct in your points as IR35 is so complex and open to interpretation but the fundamental point is about the difference about being permie and contractor. Changing the way your employer pays you and nothing else is about as basic as IR35 gets. Many situations can be argued but there are not many that are as black and white as this one.

[TestMangler]

The fact you think a PO based arrangement is IR35 safe shows complete and utter lack of understanding of IR35 even at the most basic level. Ask them for your job back and stay permie.

Sorry NLUK, this is just not true.

I've raised this several times in the past, but to much 'advice' is given out by people who don't actually know anything about the reality of an iR35 enquiry (and I don't just mean you !!)

To the O/P.....a lot depends on what is actually written on your purchase order. Are you named personally ? (a bad thing)

A lot more info about your current way of working before any guidance could be given. Are you working normal days/hours under control of a manager or can you do what you want, when you want ?

When I had my IR35 case a few years ago, I had a call off contract from HDS buying 144 days of MyCo and it was 'not considered' during the investigation. Only 'normal' client/agency/contractor arrangements were investigated.

To the OP, I would advise getting professional advice. IR35 was originally 'aimed at people leaving employment on Friday and returning as a contractor on Monday' but these words only ever appeared in Brown's budget speech, not in the legislation. (AFAIK). A professional advisor will be able to analyse the situaltion and advise without spouting tulip.

Good luck with it, but resist the move to a standard contract at all costs.

[TheoJones]

The fact you think a PO based arrangement is IR35 safe shows complete and utter lack of understanding of IR35 even at the most basic level. Ask them for your job back and stay permie.

You know what mate...

That crosses the line from "telling it like it is" into just personal abuse. out of order.

[northernladuk]

The fact you think a PO based arrangement is IR35 safe shows complete and utter lack of understanding of IR35 even at the most basic level. Ask them for your job back and stay permie.