Reply to: Having to upset clients just to stay on the right side of IR35

[KentPhilip]

Because it will be a long slow and painful process and just like any insurance product has a risk of not paying out. The standard QDOS policy only covers the first £50k and I bet many people don't check if that covers their liability or not. Sometimes a bit of prevention is much better than a cure.

There is a balance to be struck though that is for sure.

Good point. Thanks

[CheeseSlice]

Why isn't it an option? If he is caught by IR35 he'll have to pay extra tax, but will be able to claim it back from the insurance. Why isn't this an option that is just as good as not being investigated in the first place?

Some more useful info here: http://www.pcg.org.uk/tax-investigation-faq

Read "weak case" and "reasonable prospect of success". Insurance isn't a get out jail card to be relied upon in the first instance.

[Old Greg]

Because it will be a long slow and painful process and just like any insurance product has a risk of not paying out. The standard QDOS policy only covers the first £50k and I bet many people don't check if that covers their liability or not. Sometimes a bit of prevention is much better than a cure.

There is a balance to be struck though that is for sure.

Do we know if the QDOS policy has ever paid out (beyond legal representation)? We've had a few discussions over the years but I can't remember the outcome.

[northernladuk]

Why isn't it an option? If he is caught by IR35 he'll have to pay extra tax, but will be able to claim it back from the insurance. Why isn't this an option that is just as good as not being investigated in the first place?

Because it will be a long slow and painful process and just like any insurance product has a risk of not paying out. The standard QDOS policy only covers the first £50k and I bet many people don't check if that covers their liability or not. Sometimes a bit of prevention is much better than a cure.

There is a balance to be struck though that is for sure.

[KentPhilip]

I think the OP is interested in both keeping the client happy and operating in a way that is compliant with the tax rules, so just letting them treat him as a permie and getting pushed around because he has IR35 insurance it isn't really an option, nor is it a good choice. Sorry if this isn't what you were implying here.

Why isn't it an option? If he is caught by IR35 he'll have to pay extra tax, but will be able to claim it back from the insurance. Why isn't this an option that is just as good as not being investigated in the first place?

[CheeseSlice]

Then what is the problem if you are covered regardless?

I think the OP is interested in both keeping the client happy and operating in a way that is compliant with the tax rules, so just letting them treat him as a permie and getting pushed around because he has IR35 insurance it isn't really an option, nor is it a good choice. Sorry if this isn't what you were implying here.

[KentPhilip]

I also have QDOS IR35 insurance just in case its not enough.

Then what is the problem if you are covered regardless?

[Untouchable1]

I have refused to do work in the past (picking damn oranges!) - http://forums.contractoruk.com/accou...b-profile.html

However, I definitely wouldn't make an issue out of this.

I think that if it is the same 'type of work' and a one off it shouldn't be a problem. I would handle this by sending an email along the lines of 'this is new work and not in scope for our current agreement. Happy to pick this up, but it will mean that it will push out (delay) existing project by x days'.

Untouchable1

[northernladuk]

It doesn't have to be complex proving to HMRC that you're not doing employee work, it does need discipline in tracking and reporting that work though.

This ^. There is being directed by a client and there is using your position to carry out extra work in a client (which is the standard business model of most IT outsourcers). The difference is how it is documented and executed.

[VectraMan]

Yep. Flexibility and doing the job without causing problems should be the main selling point of contractors, and by refusing to do certain things, or insisting on certain things, then you're not doing that. If they start to see you as high maintenance (and after all the client has no reason to care about your personal tax situation), then replacing you with a permie will seem like a more attractive option. I'd rather be completely free to sell my product (i.e. my personal service) in any way I see fit, but IR35 ironically means you have to act less like a business.

[craig1]

In the one HMRC audit I had many years ago, I was given informal advice to be more verbose in any invoicing or supplementary sheets to invoices, such as timesheets. For example:

Monday: Work as defined in Schedule A to Master Services Agreement, 7.5hrs
Tuesday: " "
Wednesday: Work as defined in Schedule A to Master Services Agreement, 4hrs. Ad-hoc request to perform specific billable task as described in email from Mr XXX dated Wednesday 9th October 2013, 09:00, 3.5hrs
Thursday: Continuation of ad-hoc request, 7.5hrs
Friday: Work as defined...

The idea is that if your contract is written properly, as it should be, then you can take extra billable work as agreed between you and the end client, get it authorised by the client then paid by the agency without fuss while still completely covering your back as a legitimate business. You are, after all, a properly authorised officer of your company with the power to contract on its behalf on even the most informal ad-hoc basis. Just be able to show proof of their offer of work, your acceptance and an overall contract that backs it up with rate, etc. Offer of work can be as vague as you want, it can be "go build me a couple of servers for project x", proof of acceptance can be a simple "OK" reply to an email. You can even have an overall pre-authorised offer/acceptance on a ticketing system if you agree in an email somewhere that any work ticket you take is a billable bit of ad-hoc work.

It doesn't have to be complex proving to HMRC that you're not doing employee work, it does need discipline in tracking and reporting that work though.

[Kanye]

It sounds to me like you are letting the tail wag the dog to borrow the phrase above.

IR35 is important and you take what steps you can to remain independent, but this way of working could severely compromise your business.

Battling with them over stuff such as a company email address and one off or occasional extensions in scope is just likely to appear inflexible and damage your reputation with the client.

[malvolio]

The company already has an army of contractors that they treat like employees, they assign tickets to people from a ticketing system and re prioritise projects and tasks as they see fit. Barely anyone has a work schedule in their contracts, in a lot of cases I am the exception in that I insist on doing things the correct way.

Since this is the culture of the organisation I have to constantly flight to protect my rights, which just makes me look petty compared to the other quasi-employee contractors that they have.

I work from my home, I never ask permission for holidays. I refused to go to their monthly employee catchup meetings and I refuse to have a clientco email address. I collect all of this as evidence that I am not an employee, as I'm certain if HMRC asked them they would just tell them that i'm essentially an employee, and I need to prove that it is not the case. I also have QDOS IR35 insurance just in case its not enough.

Overall the client actually likes me as I produce good results, but issues like this keep cropping up.

You're missing the point. You can do ad hoc client-assigned work, providing that it doesn't conflict with your overall schedule of work (don't write code if you're there as a PM, for example) and provided both sides agree in writing to what is needed and when. To avoid D&C and to a lesser extent MOO, you need to be able to refuse work if it's outside your scope.

And FWIW cosmetics like a client email address are just that, cosmetic. If everyone has to do "something", it can't be a differentiator between employee and freelance. I can't do my job without a real client presence to put in front of their clients but that doesn't put me inside IR35.

[jonftwtaylor]

The company already has an army of contractors that they treat like employees, they assign tickets to people from a ticketing system and re prioritise projects and tasks as they see fit. Barely anyone has a work schedule in their contracts, in a lot of cases I am the exception in that I insist on doing things the correct way.

Since this is the culture of the organisation I have to constantly flight to protect my rights, which just makes me look petty compared to the other quasi-employee contractors that they have.

I work from my home, I never ask permission for holidays. I refused to go to their monthly employee catchup meetings and I refuse to have a clientco email address. I collect all of this as evidence that I am not an employee, as I'm certain if HMRC asked them they would just tell them that i'm essentially an employee, and I need to prove that it is not the case. I also have QDOS IR35 insurance just in case its not enough.

Overall the client actually likes me as I produce good results, but issues like this keep cropping up.

[malvolio]

Ermm...

An email constitutes a contract amendment if you both agree to it. Plenty of time to get the formal version added later, and it's seriously silly to lose work and reputation for the sake of contractual formalities.

PCG's Rule 1 for all contractors - never let the taxation tail wag the business dog.