Unusual contract scenario

[Sockpuppet]

You do realise that there is a principle in which if HMRC believe something is invented to avoid tax they are allowed to ignore it. Never mind IR35 they will just rock through with this.

Have we even started to look at 87% of current contract = looks suspiciously like they've taken out the employer NI portion.

In short I'd say that no-one in this relationship really know what they are doing. If they're serious take the contract but do it as self employed person not through a LTD.

[Wanderer]

fixed price (does this mean MOO is not an issue?)
own materials
no direction on how to work (specifically states that I can do the job how i like as long as I get the job done) and no specification of me being the responsible person for delivering.
should an investigation take place the company will draw up the required purchase orders to show each milestone and will confirm working conditions are outside of IR35

I wouldn't accept any artificially contrived arrangements or anything retrospectively added to the contract in the event of an investigation as that is dishonest. But there is nothing to stop you creating milestones and putting that on your invoice when you submit it and this may be evidence of a more business like relationship.

The direction and control that IR35 requires is missing from this engagement. I'd talk to them about getting a subbie in there at some stage and make sure that was all OK and then go right ahead and take the contract.

If you are rejecting the contract due to the rate and duration then that's fine but out of respect to the client and the person who will eventually take the contract, please don't upset a client who is obviously bending over backwards to make the engagement a business to business one rather than an IR35 caught disguised employee.

[farout117]

What's this? Smells like disguided permiedom, sounds like disguised permiedom, quacks like disguised permiedom.

Take it at your own risk IMO but I wouldnt touch it.

I would say negotiate a proper contract with them, maybe a 3 month rolling contract, with proper deliverables, and see if they are really genuine about this project. If they come with excuses............run.

Smells fishy to me though

[BolshieBastard]

Been offered the following:
yearly rolling contract at a fixed price (approx 87% of current day rate)
Contract is against an internal project for the client (which is essentially ficticious). Each year/fixed price contract there are 12 milestones that result in a 1/12th payment of the contract value
alongside this I have been told that I will be able to take 20 days off per year without reducing the contract value.
contract is worded so it's:
fixed price (does this mean MOO is not an issue?)
own materials
no direction on how to work (specifically states that I can do the job how i like as long as I get the job done) and no specification of me being the responsible person for delivering.
should an investigation take place the company will draw up the required purchase orders to show each milestone and will confirm working conditions are outside of IR35

You're all probably hearing the same alarm bells I did when i heard about it but just wanted to get another opinion. There's obviously a lot of trust being put in the client to deliver the correct words to hmrc if they should ask but apart from that.....does it tick the boxes you'd expect to be outside of IR35?

Think I'll get it checked over anyway

What's this? Smells like disguided permiedom, sounds like disguised permiedom, quacks like disguised permiedom.

Take it at your own risk IMO but I wouldnt touch it.

[northernladuk]

They offered perm but I declined.
You've all backed up my original thoughts on this so I think I will probably decline this as well
The only benefit from my point of view is the 12 month term of the contract and if the work is there I'll prob get continuous extensions anyway

You could have mentioned that. Wouldn't have been any need to go through it as it is black and white. Of course you will get extensions, it is your perm contract with a rather poor contractor wrapper around it. Quite possibly a text book example of why IR35 came about!

[VirtualMonkey]

They offered perm but I declined.
You've all backed up my original thoughts on this so I think I will probably decline this as well
The only benefit from my point of view is the 12 month term of the contract and if the work is there I'll prob get continuous extensions anyway

[SueEllen]

Think I'll get it checked over anyway

Don't bother the entire thing is a sham.

Why don't they hire a permanent employee? Or is there some reason they can't get one i.e. their dishonesty?

[Taita]

How can they back you up if the working practice is inside IR35? The only way to do that would be to lie and you can bet everything you have they won't be doing that. I think it is pretty unprofessional for the client to even suggest this let alone put it in as a clause. That alone would get my alarm bells going.

And from that first paragraph I would be out. Working on anything at all for 1/12 fixed price on undefined packages? **** that. You couldn't describe a permie better IMO.

Unless this is some small fly by night outfit, it is very difficult to believe an HR department will invent a legend for job description and a finance department is prepared to account for payments using another customer's POs (what about VAT)......these acts are not bending silly red tape rules, they probably are blatantly criminal, corporately as well as personally. I evisage charges of conspiracy to defraud HMRC being added to charges of tax evasion but what do I know...worse things happen at sea!

[northernladuk]

The contract is ficticious in tht there is no actual package of work ...it's more like a bucket code they use. As such I could be working on anything at all
Yes they are...or they say they are.

Thanks for all the comments NLUK. You're thnking along the same lines I was. The milestones are undefined packages and essentially get released on a time basis rather than work done so no chance f them not being hit. I had considered requesting that they get changed to varying amounts at irregular times.

It really smacks of disguised employment to me BUT the company will back me up on working practice should anyone ask.In reality I wll be working against POs that the client has raised with other companies so all my time could be attributed to them. Trouble is they don't exist yet (they are trying to secure my services and worry about the work I will be doing later)
In any event it wouldn't start until my current contract with them is up and that is not for another 5 months yet

How can they back you up if the working practice is inside IR35? The only way to do that would be to lie and you can bet everything you have they won't be doing that. I think it is pretty unprofessional for the client to even suggest this let alone put it in as a clause. That alone would get my alarm bells going.

And from that first paragraph I would be out. Working on anything at all for 1/12 fixed price on undefined packages? **** that. You couldn't describe a permie better IMO.

[malvolio]

Single client, fixed holiday term, no specific deliverables, you work on what they tell you work on which will vary... So there went D&C. Arguably the payment terms are not an irreducible minimum of mutuality. No suggestion of an RoS but that's quite weak anyway these days.

IR35 caught without a doubt, And you're looking at doing this on a reduced rate? Hmmm...

The question you should ask is why are the client offerring this? You can bet it's not becuase they like you.

[VirtualMonkey]

Couple of points:
1) What is ficticious about the contract.... the fact that it is disguised employment or that the client is proposing to pay for no work?
2) The client is prepared to make up stories for HMRC just to secure your services.....Really????

The contract is ficticious in tht there is no actual package of work ...it's more like a bucket code they use. As such I could be working on anything at all
Yes they are...or they say they are.

Thanks for all the comments NLUK. You're thnking along the same lines I was. The milestones are undefined packages and essentially get released on a time basis rather than work done so no chance f them not being hit. I had considered requesting that they get changed to varying amounts at irregular times.

It really smacks of disguised employment to me BUT the company will back me up on working practice should anyone ask.
In reality I wll be working against POs that the client has raised with other companies so all my time could be attributed to them. Trouble is they don't exist yet (they are trying to secure my services and worry about the work I will be doing later)
In any event it wouldn't start until my current contract with them is up and that is not for another 5 months yet

[Taita]

Been offered the following:
yearly rolling contract at a fixed price (approx 87% of current day rate)
Contract is against an internal project for the client (which is essentially ficticious). Each year/fixed price contract there are 12 milestones that result in a 1/12th payment of the contract value
alongside this I have been told that I will be able to take 20 days off per year without reducing the contract value.
contract is worded so it's:
fixed price (does this mean MOO is not an issue?)
own materials
no direction on how to work (specifically states that I can do the job how i like as long as I get the job done) and no specification of me being the responsible person for delivering.
should an investigation take place the company will draw up the required purchase orders to show each milestone and will confirm working conditions are outside of IR35

You're all probably hearing the same alarm bells I did when i heard about it but just wanted to get another opinion. There's obviously a lot of trust being put in the client to deliver the correct words to hmrc if they should ask but apart from that.....does it tick the boxes you'd expect to be outside of IR35?

Think I'll get it checked over anyway

Couple of points:
1) What is ficticious about the contract.... the fact that it is disguised employment or that the client is proposing to pay for no work?
2) The client is prepared to make up stories for HMRC just to secure your services.....Really????

[northernladuk]

Am sure TM will come along and tell us that if your contract passes inspection by the likes of QDOS you are ok but.....

yearly rolling contract at a fixed price (approx 87% of current day rate) - Doesn't sound good.

Contract is against an internal project for the client (which is essentially ficticious). - Doesn't sound good

Each year/fixed price contract there are 12 milestones that result in a 1/12th payment of the contract value - What happens if you miss a milestone or are horrendously late as internal projects often are. Are you taking risk on or between the lines you will get 12 payments a year i.e. set monthly with no risk?

alongside this I have been told that I will be able to take 20 days off per year without reducing the contract value. - Hmm not sure about this one. Nothing wrong with negotiating floating days in a contract BUT if you can ONLY take 20 days this sounds like direction and control = v bad.

contract is worded so it's:
fixed price (does this mean MOO is not an issue?) - But it is 1/12th payments so could make it a sham.

own materials - Result!!!n

o direction on how to work (specifically states that I can do the job how i like as long as I get the job done) and no specification of me being the responsible person for delivering. - But direction on how many days you can take off a year. It isn't just about direction on the work you do as much as direction on processes you follow as well. What about expenses? Can you invoice or have to put in expense request? On a fixed price 1/12 payment thing it doesn't sound like you have the flexibility to invoice them.

should an investigation take place the company will draw up the required purchase orders to show each milestone and will confirm working conditions are outside of IR35 - This doesn't sound right. You are in our out, not fudged in the event of an investigation. Sounds good but thinking about it I am not so sure.

Very interesting one this but on the face of it I would be very wary. The fixed price option does sound tempting but the holidays thing and the unknowns of expenses etc makes me wonder. A permie is on a fixed salry with 20 days off a year with no change in price is the first thing that shot to my mind but it wouldn't be unreasonable for a company to negotiate a service contract with similar clauses. The internal ficticious bit scares me though.

Contract check is an absolute must as would be a confirmation letter signed by the client.

I think the devil could be in teh details in this one though.

[VirtualMonkey]

Been offered the following:
yearly rolling contract at a fixed price (approx 87% of current day rate)
Contract is against an internal project for the client (which is essentially ficticious). Each year/fixed price contract there are 12 milestones that result in a 1/12th payment of the contract value
alongside this I have been told that I will be able to take 20 days off per year without reducing the contract value.
contract is worded so it's:
fixed price (does this mean MOO is not an issue?)
own materials
no direction on how to work (specifically states that I can do the job how i like as long as I get the job done) and no specification of me being the responsible person for delivering.
should an investigation take place the company will draw up the required purchase orders to show each milestone and will confirm working conditions are outside of IR35

You're all probably hearing the same alarm bells I did when i heard about it but just wanted to get another opinion. There's obviously a lot of trust being put in the client to deliver the correct words to hmrc if they should ask but apart from that.....does it tick the boxes you'd expect to be outside of IR35?

Think I'll get it checked over anyway