Reply to: Supply of services with no named workers always outside IR35?

[jamesbrown]

If Section 49(1)(a) is not satisfied, then the rest of Chapter 8 (or "the law" as you put it) falls away and becomes irrelevant. I prefer to look at wording of the specific legislation and case law than to refer generally to "the law".

You may be looking, but you're not comprehending. It kinda needs both.

Services are delivered by people. Section 49(1)(a) is not distinguishing between people and automatons. It is identifying a situation where a worker performs work or is obliged to perform work. What the worker's written contract says and how many intermediaries are interposed between the worker and the end client and who they are is nothing more than window dressing. The legislation is invariant to written contractual terms. The contract could mention you-person or it could not mention you-person, ever. That is totally irrelevant w/r to Section 49(1)(a). If YourCo-person actually does work or is obliged to do work, rather than YourCo automaton, then YourCo-person satisfies Section 49(1)(a). The YourCo contract that never mentions a person but involves work that is delivered by people satisfies Section 49(1)(a) for each person.

A big-three consultant working on a client site is a worker doing work. Likewise, a PSC director performing work remotely for a client is a worker doing work. Likewise a YourCo employee working for a client is a worker doing work. IR35 is not limited to things like "directors of PSCs". It isn't even limited to companies.

The nature of that work comes second. You are leaping ahead to the second thing before you've even understood the first thing. The first thing is concerned with workers doing work.

The second thing is the nature of how that work is delivered. What does the hypothetical contract look like? The hypothetical contract is Section 49(1)(c). Does it look like a contract of service or a contract for services? If it's a contract for services, then there is no personal service, but the service is still delivered by a person.

That's the last thing I'll say. Perhaps stick to running your company rather than armchair lawyering. I mean, really, you think that legislation announced and implemented twenty years ago was written by noddy and no one has noticed that yet?

[LondonManc]

I did choose the name NotAllThere quite deliberately, being fully aware of my limitations.

FTFY

[eek]

If Section 49(1)(a) is not satisfied, then the rest of Chapter 8 (or "the law" as you put it) falls away and becomes irrelevant. I prefer to look at wording of the specific legislation and case law than to refer generally to "the law".

Who is sat at the end client doing the work - is it David Jones the person the client interviewed or is it Fred Smith the person your company asked to attend last week.

Once you talk about named consultants agreed by the end client Section 49(1)a is ignored and the rest of Chapter 8 still exists.

To be honest the issue is with the end client - unless you can get them to charge their minds no amount of arguing here is going to solve things. and if you think they will gamble their reputation (remember HMRC are going around saying they will investigate - do you wish to be the test case) on your interpretation of the law I wish you luck.

[NFH]

Then following the law which says ignore what the paperwork says and look at a hypothetical contract rather than the paper versions, the end client is getting the named contractors they wanted and the contracts are the sham everyone knows they are.

If Section 49(1)(a) is not satisfied, then the rest of Chapter 8 (or "the law" as you put it) falls away and becomes irrelevant. I prefer to look at wording of the specific legislation and case law than to refer generally to "the law".

[eek]

I addressed this in the third paragraph of my original post. Clients would get the workers they want, even if no individual workers are named anywhere in the supply chain.

Then following the law which says ignore what the paperwork says and look at a hypothetical contract rather than the paper versions, the end client is getting the named contractors they wanted and the contracts are the sham everyone knows they are.

Now you may be able to find a client willing to play this type of games but most are far too risk adverse to be the firm being made an example of.

[NotAllThere]

I addressed this in the third paragraph of my original post. Clients would get the workers they want, even if no individual workers are named anywhere in the supply chain.

This bit you mean?

Clients, particularly banks, will have screening procedures before any of the supplying company’s consultants can gain access to the client’s buildings or systems. There is often a lead time of around one month for such screening, which conveniently matches the typical notice period for termination of the services.

I've been contracting since 1997. Every single contract I've had has expected me to start working day 1. No screening, no lead times. (Security cleared contracts notwithstanding).

So your scenario works, if at all, only with a subset of clients. I don't think your scenario works at all, HMRC will see through any process which guarantees a specific worker.

A named resource is a pointer to IR35. Not naming the resource is not a pointer against IR35. HMRC construct a hypothetical contract, and name the worker.

[NFH]

Clients in my experience want specific individuals. If a NotAllThere Ltd has only one worker, who is MD and 50% shareholder, then hiring NotAllThere Ltd is the same as hiring NotAllThere.

Why should the client work with the agent and the contractor? What's in it for the client? For no effort "you must go through a brolly", they get the workers they want.

I addressed this in the third paragraph of my original post. Clients would get the workers they want, even if no individual workers are named anywhere in the supply chain.

[cojak]

The point is this. If Section 49(1)(a) of the Income Tax (Earnings and Pensions) Act 2003 is not satisfied, then the obligations of the proposed legislation upon the client all fall away. Contractors, agents and clients should be working together to find a way to ensure that Section 49(1)(a) is not satisfied, and the most obvious way to achieve this appears to be avoiding naming individual workers. A further argument in favour of this approach is that it is impossible to deduct PAYE in respect of an unspecified or unnamed worker, because an unspecified or unnamed worker does not have a tax code or National Insurance number.

I urge you all to look closely at the wording of the legislation, together with any relevant case law about interpretation of Section 49(1)(a).

Yup, duly read.

And if I was an HR bod showing HMRC out through my door that wouldn't mean diddlysquat - it's easier and less risky to do what they've done.

But let's go with your post, you are expecting clients, agents and contractors to fight on the same side? Clients have already broken ranks and are running around like headless chickens.

Not sure what can be done tbh, but it does sound as if you have a plan...

[northernladuk]

I did choose the name NotAllThere quite deliberately, being fully aware of the connotations. .

And because WhatAW****r wouldn't pass the swear filter.

[NotAllThere]

I did choose the name NotAllThere quite deliberately, being fully aware of the connotations.

The point I was making is that IR35 has been around for 20 years. All these workarounds have already been considered. If they could work, they would have worked by now. All clients have had to do, and all they need to do now is have proper contracts for service. But they've not gone that way since pre-2020, the risk was on the consultant, and post-2020, it doesn't eliminate the risk.

Therefore why are end-clients not moving towards hiring named companies instead of hiring named individuals? This would get around all the problems of IR35.

Clients in my experience want specific individuals. If a NotAllThere Ltd has only one worker, who is MD and 50% shareholder, then hiring NotAllThere Ltd is the same as hiring NotAllThere.

Why should the client work with the agent and the contractor? What's in it for the client? For no effort "you must go through a brolly", they get the workers they want.

Maybe that's how you personally work, but some of us are genuinely in business with multiple employees and being hit equally by these proposed changes. Clients will no longer engage us as a company and instead want our employees to become employees of some umbrella, putting us out of business. It is killing genuine small consultancies as well as one-man-band personal service companies like you.

I may be a one man band, but I am "genuinely in business". It's rather arrogant to assume that all contractors are bums on seats.

As I understand the rules, your problem only arises if you've got workers with 5% of more of the shares. If your workers don't, then you must convince your client the rules don't apply.

[WTFH]

The point is you need to talk to your customer(s) to find out why they have chosen to drop your employee(s) from their PSL (if they have one), and see if you can convince them to change their mind about you.

[NFH]

The point is this. If Section 49(1)(a) of the Income Tax (Earnings and Pensions) Act 2003 is not satisfied, then the obligations of the proposed legislation upon the client all fall away. Contractors, agents and clients should be working together to find a way to ensure that Section 49(1)(a) is not satisfied, and the most obvious way to achieve this appears to be avoiding naming individual workers. A further argument in favour of this approach is that it is impossible to deduct PAYE in respect of an unspecified or unnamed worker, because an unspecified or unnamed worker does not have a tax code or National Insurance number.

I urge you all to look closely at the wording of the legislation, together with any relevant case law about interpretation of Section 49(1)(a).

[Lance]

Not true. The total amount paid by the client is not then in turn paid via PAYE to the employees. I know of no consultancy that does this, because they would make no profit if they did so.


Yes, sometimes we do use contractors, which never caused a problem in the past.

Please can we get this back on topic?

You need to talk to your client contact in purchasing to make sure they class you as an agency, or supplier.

It sounds like they consider you to be a PSC. Forget the legislation and your interpretation of it. You need the client to agree what you are and no amount of legal argument is going to aid that.

I take it you're on the client's PSL and there's no agency involved?

[eek]

The question is not about whether there's anything we can do about clients taking this risk-averse approach. The question is why end-clients are not moving towards hiring named companies instead of hiring named individuals, which would arguably get around all the problems of the proposed changes to IR35.

Because HMRC have put the fear of God into HR and a lot of other companies have their ear and add to the panic / confusion because there is money in it for them. HMRC have been having "take a coffee" chats with a lot of large companies that use contractors to ask how much they would like to be one of the examples they are looking for

[jamesbrown]

The question is not about whether there's anything we can do about clients taking this risk-averse approach. The question is why end-clients are not moving towards hiring named companies instead of hiring named individuals, which would arguably get around all the problems of the proposed changes to IR35.

As I’ve told you above, you’ve misunderstood the legislation. The legislation constructs a *hypothetical* contract. The actual contract is just window dressing. The hypothetical contract *looks through* any and all intermediaries. Now you’re further misunderstanding your client. What matters is not what the ITEPA says or doesn’t say - the new legislation doesn’t even exist yet - but how the client wants to address risk as they perceive it. Risk is perception.