Reply to: Public Sector IR35 New Requirement.

[eek]

WSS

My first contract was inside IR35. This was in part due to a complete and utter #@&% of a dev manager, who when contractors politely pointed out that following certain ClientCo policies could cause issues with IR35, he quite proudly (and loudly) stated "tough - your tax affairs are not my problem".

Which works until he has no developers but considering how few people know the intimate details about these things I doubt he's had a shortage of contractors.

[centurian]

Wouldn't be surprised if this happens - was watching Treasury Select Committee meeting the other day on the whole BBC off payroll fiasco and it was stated that the BBC could be subject to fines from HMR&C for not establishing IR35 status; don't know it's just because the tax payer has an interest or because they are thinking along the lines you're suggesting

WSS

My first contract was inside IR35. This was in part due to a complete and utter #@&% of a dev manager, who when contractors politely pointed out that following certain ClientCo policies could cause issues with IR35, he quite proudly (and loudly) stated "tough - your tax affairs are not my problem".

[centurian]

Don't rely too much on Dragonfly, it was a bit of a one off in many senses (not least the judge's cheery dismissal of the client's admission that they had no intention of honouring the contractual clauses the'd agreed to, and a strong MOO indicator could be ignored...). Ultimately the case was lost on D&C, where the client was telling the worker what to work on next, but you only need one of the three of D&C, MOO and RoS to be present and two of them were. The decision was appealable had Dragonfly not lost interest in fighting any more.

But the one thing it did prove was that the reality on the ground and the contract had to align properly.

True - I agree it's important not to be too scared by Dragonfly.

But - it is legal precedent now, which makes it considerably harder to argue against points raised in the judgement - such as having a series of contracts whereby bad IR35 clauses are removed, which is what the OP was considering as their preferred option.

[Defstun]

I don't see what the problem is.
You send them a letter with evidence stating that you believe you are outside IR35. If they don't agree with you then stuff them - they can't force you to go inside IR35, all they can do is fire you, in which case let them.

Get the QDOS insurance which will cover you whatever. You no longer need to have contracts assessed by them, and they will cover you whatever the content of any contract (subject to some questions that you can read on their application home page).

Cheers kent. Gonna do exactly that and I'm going to stop worrying about the whole thing.

[LisaContractorUmbrella]

No , the cheery dismissal was the judge ignoring a key point of contract law, that it is a mutual agreement. The client had agreed to permit a sub in the full knowledge that they had no intention of ever doing so.

Of course, the way IR35 works, the client can do what the hell they like, having dumped their contractor in the brown stuff, since there is no comeback. If you could change one thing about IR35, it would be to put the Employer NIC liability back on the client. You would quickly see better, and better-honoured contracts turning up.

Wouldn't be surprised if this happens - was watching Treasury Select Committee meeting the other day on the whole BBC off payroll fiasco and it was stated that the BBC could be subject to fines from HMR&C for not establishing IR35 status; don't know it's just because the tax payer has an interest or because they are thinking along the lines you're suggesting

[KentPhilip]

the other day I received a letter from them stating that they believe my contract falls within IR35 and I have to provide evidence, either that I am outside IR35 or provide a projected amount of tax/NI I would pay if within IR35.

I don't see what the problem is.
You send them a letter with evidence stating that you believe you are outside IR35. If they don't agree with you then stuff them - they can't force you to go inside IR35, all they can do is fire you, in which case let them.

Get the QDOS insurance which will cover you whatever. You no longer need to have contracts assessed by them, and they will cover you whatever the content of any contract (subject to some questions that you can read on their application home page).

[malvolio]

Haven't you just contradicted yourself there Mal? The judge's 'cheery dismissal' was as a result of the contract not reflecting reality. Even HMR&C have had long enough to work out that a contract that doesn't reflect reality is not worth the paper it's written on; the Dragonfly case was the first to hammer this home.

No , the cheery dismissal was the judge ignoring a key point of contract law, that it is a mutual agreement. The client had agreed to permit a sub in the full knowledge that they had no intention of ever doing so.

Of course, the way IR35 works, the client can do what the hell they like, having dumped their contractor in the brown stuff, since there is no comeback. If you could change one thing about IR35, it would be to put the Employer NIC liability back on the client. You would quickly see better, and better-honoured contracts turning up.

[LisaContractorUmbrella]

Don't rely too much on Dragonfly, it was a bit of a one off in many senses (not least the judge's cheery dismissal of the client's admission that they had no intention of honouring the contractual clauses the'd agreed to, and a strong MOO indicator could be ignored...). Ultimately the case was lost on D&C, where the client was telling the worker what to work on next, but you only need one of the three of D&C, MOO and RoS to be present and two of them were. The decision was appealable had Dragonfly not lost interest in fighting any more.

But the one thing it did prove was that the reality on the ground and the contract had to align properly.

Haven't you just contradicted yourself there Mal? The judge's 'cheery dismissal' was as a result of the contract not reflecting reality. Even HMR&C have had long enough to work out that a contract that doesn't reflect reality is not worth the paper it's written on; the Dragonfly case was the first to hammer this home.

[Defstun]

In my experience at the last two gigs the number of disguised employee type contractors that know squat about IR35 and make no effort to look like, act and be a contractor running a business far outweighs the guys that do.

Agreed. The problem from my side is this. I became a contractor because I wanted to experience the satisfaction of delivering products to clients. The fact that the clients and products change frequently is appealing, it keeps the work varied and challenging.

When you first become a contractor it's natural to ask other contractors you are working next to how they operate, what they do in situation x etc. But if all the contractors you meet are naive about IR35 and give you false information, how are you supposed to decipher good information when you're just starting out? Why wouldn't I trust the answers of contractors who have been in the game for years?

I now know that the majority are naive r.e. IR35 and I have learnt more from being on this forum in two days than I have in the last two years. From receiving answers from contractors along the way I feel I have been fed a false reality of how contractors should operate.

That being said, I have always operated as if I am a company creating products for clients, that was my idea in the outset. If I am deemed to be in IR35 then it is my own fault for not showing 'due diligence' in the pre process of signing contracts etc. Not due to intentionally trying to avoid tax.

What really pisses me off it then makes the guys trying to do the right thing look like a trouble maker when he tries to stick to his contract etc.

Agreed. I was considered the black sheep in my previous contract when I stood up for myself. The other two contractors simply did what the company was asking them to do and thought I was odd for rejecting it.


Thanks for all the responses and input, I feel I have a lot more knowledge about IR35 now.

[malvolio]

Don't rely too much on Dragonfly, it was a bit of a one off in many senses (not least the judge's cheery dismissal of the client's admission that they had no intention of honouring the contractual clauses the'd agreed to, and a strong MOO indicator could be ignored...). Ultimately the case was lost on D&C, where the client was telling the worker what to work on next, but you only need one of the three of D&C, MOO and RoS to be present and two of them were. The decision was appealable had Dragonfly not lost interest in fighting any more.

But the one thing it did prove was that the reality on the ground and the contract had to align properly.

[northernladuk]

However, I would say that out of the 15 contractors I know, all of them would fall into the same category as the one above preposed by the Special Commissioner. How many of you have worked in a similar manner to the one described above? Perhaps all the contractors I know are naive when it comes to IR35 but I would surmise that how they work is the norm.

Which is why we are on the backfoot fighting for all this and people on this forum get annoyed at other contractors poor approach to their work. I know I do.

In my experience at the last two gigs the number of disguised employee type contractors that know squat about IR35 and make no effort to look like, act and be a contractor running a business far outweighs the guys that do. What really pisses me off it then makes the guys trying to do the right thing look like a trouble maker when he tries to stick to his contract etc.

Surmising what they do is the norm without understanding your situation and running your affairs properly is probably part of the problem we have.

Rant over. Soapbox stored...

[Defstun]

I'd say it's even counter productive.

Don't just take my opinion for it. Google "Dragonfly IR35" and read the judgement text. This chap did something very similar - amended successive contracts to remove bad IR35 clauses - and he got nailed in court for it.

Thanks for that. I have just read several pages describing the judgement. Worrying stuff, especially this quote:

Special Commissioner, Charles Hellier concluded:"Overall I find nothing which points strongly to the conclusion that Mr Bessell would have been in business on his own account; by contrast when I stand back and look at the overall picture I see someone who worked fairly regular hours during each engagement, who worked on parts of a project which were allocated to him as part of the AA's teams, who was integrated into the AA's business, and who had a role similar to that of a professional employee. Mr Bessell did not get paid for, or go to work to provide, a specific product; instead he provided his services to the AA to be used by them in testing the parts of a project which from time to time were allocated to him. He was engaged in relation to the work to be done on a specific project but not to deliver anything other than his services in providing testing in relation to that project. In my opinion he would have been an employee had he been directly engaged by the AA."

I am paid to provide a specific product, I am not working on any other day to day tasks nor am I asked to stop what I am doing to help out other members of the team etc.

However, I would say that out of the 15 contractors I know, all of them would fall into the same category as the one above preposed by the Special Commissioner. How many of you have worked in a similar manner to the one described above? Perhaps all the contractors I know are naive when it comes to IR35 but I would surmise that how they work is the norm.

What about testers? They don't deliver a product, they are there to test the system created by other employees/contractors. The very nature of their work seems opposed to IR35. Unless an acceptable 'product' is a report based on the result of testing a system.

[nomadd]

I'd say it's even counter productive.

Don't just take my opinion for it. Google "Dragonfly IR35" and read the judgement text. This chap did something very similar - amended successive contracts to remove bad IR35 clauses - and he got nailed in court for it.

Just what I was thinking...

[centurian]

2: Terminate the current contract, amend it to be IR35 compliant and sign it again (client willing).

Probably the most desirable option.

And least plausible.

I'd say it's even counter productive.

Don't just take my opinion for it. Google "Dragonfly IR35" and read the judgement text. This chap did something very similar - amended successive contracts to remove bad IR35 clauses - and he got nailed in court for it.

[Defstun]

Do you have legal representation from the likes of the PCG, QDOS or AbbeyTax that you can engage to act on your behalf?

Yes, I am a member of PCG and I am currently engaged with AbbeyTax for a full review at the moment. Just filling out the questionnaire.