Reply to: Telegraph article on IR35 impact

[MrMarkyMark]

The problem is unlikely to be your other bits of work, which, from what you've said, should be clearly outside. The problem is always going to be the main contract.

Correct.

Even a part time, 20 hour a week contract can easily fall under IR35.

[mudskipper]

I appreciate what you're saying, but the other pieces of work aren't even contracts - they are professional services engagements. Work I have tendered for, produced a proposal for, won the business for and then executed on. No agents, direct, competing against other competitive consultants who also want the work.

Surely this sets me apart as a "true" consultant? And that surely would have to be strongly factored in to any argument relating to disguised employment elsewhere? I.E. the chances are if that's how I conduct myself at multiple other clients, that pattern of behavior will be consistent across other engagements as well, no?

If HMRC would even dare attempt to start accusing other contractors who had undertaken work in a similar manner of being disguised employees it'd be enough to make me want to quit contracting, and i've only just started! There seems to be a massive air of them just wanting everyone inside IR35 and not stopping until the market gets to that point.

The problem is unlikely to be your other bits of work, which, from what you've said, should be clearly outside. The problem is always going to be the main contract.

[jamesbrown]

Thanks for the super comprehensive and well written response JB

Depending on the work and value of the work to be undertaken, I put a quote together for my client and, if the work is fairly low value / quick to complete, the deliverables go on the quote. Once I have it in writing they wish to accept, I complete the work and invoice for it.

If it's a larger / longer term piece, I follow the same process only I also define a Scope of Works; which I guess you could say is a contract. I then put on my quote "for detailed deliverables see SoW". Process is then the same going forward.

So yeah - there is a contract between myself and the end client to deliver a service or product, but the terms of that are largely implied I would suspect.

Sure

But you presumably have T&C, right? Having an arrangement based on Purchase Orders is perfectly viable, and something that I've used in the past for small pieces of work. It sounds like you do this. However, I would also attach my T&C when signing the PO (a one-pager). The main reason for having the T&C explicit, rather than implied, is not for IR35, but for commercial reasons. That said, having a solid contract isn't going to hurt w/ IR35 either.

[mattfx]

I'm not sure what "aren't contracts" means TBH. Contract law is the basis for any engagement between two parties, whether explicit or implied.

I'm not talking about your personal circumstances, because I have no idea what they are, but I suspect that you're making a few different points here:

1. HMRC would see a bunch of contracts and back-off.
2. If they didn't, they'd look at the individual contracts and then back-off.
3. If they didn't, they'd have a tough time arguing that I wasn't in business on my own account.

I think you misunderstand the process. There's absolutely no evidence whatsoever that HMRC "backs-off" under any superficial circumstances. They pursue a case until the detailed facts are established. That's the whole point of operating a deterrent. This isn't about saving tax payer's money though the timely closure of individual investigations. There are countless anecdotes on CUK and elsewhere that support this (one that comes to mind involved a demonstrated, valid, substitution, which did not close down further investigation).

The reality is that HMRC would ask to see all your contracts, and they would then take the contract(s) that looked best for further investigation. All the anecdotal stuff about other contracts (especially if they account for a small fraction of your turnover) will be completely unconvincing, pre-tribunal. In short, of the enumerated points above, the final point may be correct, but it won't be established until you're way down the pipeline of due process. They won't "back off" because a certain % of your contracts look watertight. If one looks arguable, that will be pursued (and even if it doesn't, it will be pursued to some extent).

Thanks for the super comprehensive and well written response JB

Depending on the work and value of the work to be undertaken, I put a quote together for my client and, if the work is fairly low value / quick to complete, the deliverables go on the quote. Once I have it in writing they wish to accept, I complete the work and invoice for it.

If it's a larger / longer term piece, I follow the same process only I also define a Scope of Works; which I guess you could say is a contract. I then put on my quote "for detailed deliverables see SoW". Process is then the same going forward.

So yeah - there is a contract between myself and the end client to deliver a service or product, but the terms of that are largely implied I would suspect.

[jamesbrown]

A significant factor in the ECR Consulting (Elaine Richardson) case was that she was in business on her own account, and having multiple clients concurrently was specifically cited as evidence to that effect.

This was a minor factor in ECR, alongside many other minor, "in business", factors. As I recall, that case passed on every single major determinant (Moo, D&C, unfettered RoS).

That is probably not a precedent that HMRC want to have reinforced by further rulings, which is a risk they would run if they bring cases against people with multiple concurrent clients. Have there been any cases since then that HMRC have pursued where the contractor had multiple concurrent contracts?

Hardly a precedent for concurrent clients or, indeed, in business factors being critical more generally. It's well established that they contribute to the overall picture and that the overall picture is important. By implication, they could be important in marginal cases. I'm not disputing that. What I am disputing is that "in business" factors are sufficient when all of the major tests are failed for any one contract.

On your specific question: how many IR35 cases have there been since 2011 fullstop? We have a body of about 20 IR35 cases to draw on, in addition to employment cases over many decades.

[WordIsBond]

A significant factor in the ECR Consulting (Elaine Richardson) case was that she was in business on her own account, and having multiple clients concurrently was specifically cited as evidence to that effect.

That is probably not a precedent that HMRC want to have reinforced by further rulings, which is a risk they would run if they bring cases against people with multiple concurrent clients. Have there been any cases since then that HMRC have pursued where the contractor had multiple concurrent contracts?

People with multiple concurrent contracts, unless they are idiots in what they allow to be written into their contract, can argue there is no MOO (they don't have to take work because they can just go work for their other clients) and can argue that there is no SDC at least on when they work, and often on other aspects of SDC.

Having multiple contracts is not a silver bullet but unless you are a fool you are likely to have a strong case on other points.

HMRC do not want losing precedents, nor to reinforce losing precedents. They don't care about the money that much but every case they lose lessens the FUD factor.

[jamesbrown]

I appreciate what you're saying, but the other pieces of work aren't even contracts - they are professional services engagements. Work I have tendered for, produced a proposal for, won the business for and then executed on. No agents, direct, competing against other competitive consultants who also want the work.

Surely this sets me apart as a "true" consultant? And that surely would have to be strongly factored in to any argument relating to disguised employment elsewhere? I.E. the chances are if that's how I conduct myself at multiple other clients, that pattern of behavior will be consistent across other engagements as well, no?

If HMRC would even dare attempt to start accusing other contractors who had undertaken work in a similar manner of being disguised employees it'd be enough to make me want to quit contracting, and i've only just started! There seems to be a massive air of them just wanting everyone inside IR35 and not stopping until the market gets to that point.

I'm not sure what "aren't contracts" means TBH. Contract law is the basis for any engagement between two parties, whether explicit or implied.

I'm not talking about your personal circumstances, because I have no idea what they are, but I suspect that you're making a few different points here:

1. HMRC would see a bunch of contracts and back-off.
2. If they didn't, they'd look at the individual contracts and then back-off.
3. If they didn't, they'd have a tough time arguing that I wasn't in business on my own account.

I think you misunderstand the process. There's absolutely no evidence whatsoever that HMRC "backs-off" under any superficial circumstances. They pursue a case until the detailed facts are established. That's the whole point of operating a deterrent. This isn't about saving tax payer's money though the timely closure of individual investigations. There are countless anecdotes on CUK and elsewhere that support this (one that comes to mind involved a demonstrated, valid, substitution, which did not close down further investigation).

The reality is that HMRC would ask to see all your contracts, and they would then take the contract(s) that looked best for further investigation. All the anecdotal stuff about other contracts (especially if they account for a small fraction of your turnover) will be completely unconvincing, pre-tribunal. In short, of the enumerated points above, the final point may be correct, but it won't be established until you're way down the pipeline of due process. They won't "back off" because a certain % of your contracts look watertight. If one looks arguable, that will be pursued (and even if it doesn't, it will be pursued to some extent).

[mattfx]

I appreciate what you're saying, but the other pieces of work aren't even contracts - they are professional services engagements. Work I have tendered for, produced a proposal for, won the business for and then executed on. No agents, direct, competing against other competitive consultants who also want the work.

Surely this sets me apart as a "true" consultant? And that surely would have to be strongly factored in to any argument relating to disguised employment elsewhere? I.E. the chances are if that's how I conduct myself at multiple other clients, that pattern of behavior will be consistent across other engagements as well, no?

If HMRC would even dare attempt to start accusing other contractors who had undertaken work in a similar manner of being disguised employees it'd be enough to make me want to quit contracting, and i've only just started! There seems to be a massive air of them just wanting everyone inside IR35 and not stopping until the market gets to that point.

[jamesbrown]

No idea. Sadly you have to defeat the original legislation and case law to win that argument.

As people have said, it is a risk mitigation, but it is not a defence if challenged. The prosecution and the bench will simply ignore the other contracts

Ignore is too strong, but they’ll only use it in assessing whether the contractor is in business on their own account, and not to establish whether the contract in question is caught (this is a truism). Either way, the case law supports what you’re saying. It’s contract-by-contract, both in theory and in practice. It’s perfectly possible to have multiple caught contracts, some caught and some not, a change in the status of a contract over time etc. Case law supports this.

[malvolio]

How can it not be? If you worked at Client A for 3 days then at Client B for 2 days in a week, you are clearly demonstrating that you're a consultant who is free from any kind of "disguised employment" at either client, no? I have two clients in addition to my current "main" contract who I've been doing bits and pieces of work for here and there, some of which I've done in evenings and weekends and others I have taken days out of being on site at my main client to do. Surely that demonstrates quite clearly I cannot be a disguised employee at any of them!?

No idea. Sadly you have to defeat the original legislation and case law to win that argument.

As people have said, it is a risk mitigation, but it is not a defence if challenged. The prosecution and the bench will simply ignore the other contracts

[MrMarkyMark]

How can it not be? If you worked at Client A for 3 days then at Client B for 2 days in a week, you are clearly demonstrating that you're a consultant who is free from any kind of "disguised employment" at either client, no? I have two clients in addition to my current "main" contract who I've been doing bits and pieces of work for here and there, some of which I've done in evenings and weekends and others I have taken days out of being on site at my main client to do. Surely that demonstrates quite clearly I cannot be a disguised employee at any of them!?

What you think does not count in HMRCs eyes as far as contracts go.
They could say a person was contracted to do a couple of part time jobs.

However, I would wager your working practices would cover you in this particular instance.

[mattfx]

Ermm, no...

IR35 is judged on a contract by contract basis, one at a time. You can be done for one of your multiple gigs just as easily as someone with a single client. Multiple clients is not a defence.

HTH...

How can it not be? If you worked at Client A for 3 days then at Client B for 2 days in a week, you are clearly demonstrating that you're a consultant who is free from any kind of "disguised employment" at either client, no? I have two clients in addition to my current "main" contract who I've been doing bits and pieces of work for here and there, some of which I've done in evenings and weekends and others I have taken days out of being on site at my main client to do. Surely that demonstrates quite clearly I cannot be a disguised employee at any of them!?

[Lance]

That argument only works while the contractor determines whether the contract is inside or outside IR35. Once determination is made by the customer - it's likely that we will have more situations like one I've heard of in the NHS where a consultant is deemed inside on one contract and outside on the other 3 (he worked across 4 trusts - I have to check as I suspect he now only works for 3)....

Indeed.

[eek]

you miss my point. You are right but still miss the point that WIB and I are making.

With multiple clients it's difficult to demonstrate that you are under SDC for any of them.
And yes if there was one you did most work for they'd pick on that one first, but IMO if your revenue is split equally between more than 3 clients they'll move swiftly on to an easier target.

I am not suggesting this is the correct legal definition just how it works in practise.

That argument only works while the contractor determines whether the contract is inside or outside IR35. Once determination is made by the customer - it's likely that we will have more situations like one I've heard of in the NHS where a consultant is deemed inside on one contract and outside on the other 3 (he worked across 4 trusts - I have to check as I suspect he now only works for 3)....

[Lance]

Ermm, no...

IR35 is judged on a contract by contract basis, one at a time. You can be done for one of your multiple gigs just as easily as someone with a single client. Multiple clients is not a defence.

HTH...

you miss my point. You are right but still miss the point that WIB and I are making.

With multiple clients it's difficult to demonstrate that you are under SDC for any of them.
And yes if there was one you did most work for they'd pick on that one first, but IMO if your revenue is split equally between more than 3 clients they'll move swiftly on to an easier target.

I am not suggesting this is the correct legal definition just how it works in practise.