Is lack of a genuine right of substitution an automatic IR35 fail? Is lack of a genuine right of substitution an automatic IR35 fail?
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  1. #1

    Default Is lack of a genuine right of substitution an automatic IR35 fail?

    I had a QDOS full review. The contract passed but the working practices (and hence the overall assessment) came back as a fail solely due to me saying that in practice the client would probably invoke their right to terminate without notice rather than accept my contractual right to substitute. Do you need to satisfy substitution AND control AND MOO to be outside?

  2. #2

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    No. You say solely, but I doubt it. You were probably weak on the D&C aspects too. Ultimately, it comes down a subjective judgement, in the round.

  3. #3

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    You only need to prove one of the three main pillars of defence. However QDOS will push for you to have all three bases covered. A “fail” doesn’t mean you are caught by IR35 but you will need to exercise your own judgement if you wish to continue with the contract and treat it as outside IR35.

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    And that knowledge would include the risk of not being insured after the QDOS assessment.

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    If it was strictly policed then almost every member on this forum would fail it, even the more difficult individuals

  6. #6

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    Quote Originally Posted by cojak View Post
    And that knowledge would include the risk of not being insured after the QDOS assessment.
    I agree. That's why I turned down the QDOS insurance and stuck with IPSE as I can't see a way of proving you have the RoS in practice. When I asked QDOS that I have the right in my contract but it has never come up in conversation with the client about out how it would be executed, I was told by QDOS to confirm it with the client it existed in practice. Not really helpful as I would probably not execute the the RoS anyway.
    Last edited by BlueSharp; 16th September 2019 at 09:04.

  7. #7

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    Very grey area this one. It's been dismissed in case law as largely irrelevant in the past. It's also been called a sham by a judge yet it factored heavily in recent cases. It's often touted as one of the main pillars but even Kate Cottrell has said in the past it's a minor one.

    The test that has been using in past cases is that it is an option and in the contract. The fact it hasn't been used is irrelevant. It's there as an option. BUT... if you then ask your client further down the line and they refuse then you've just shot yourself in the foot. It's OK if it's unused, it's ruined if the client confirms they won't. There is the argument about breach of contract but that's another discussion.

    So who really knows. Bit of a case of 'do you feel lucky punk'.

    I do think however if people are giving out contracts with fettered RoS in this day and age then I think it's the tip of the iceberg and something else is wrong. It's well known enough to at least get the wording right. If they haven't bothered doing it right first time then what else is wrong with the contract?

    Rather annoyingly some clients like Bank of England deem all their contracts inside due them not being able to allow RoS dues to SC and security purposes. I think this is wholly wrong. They 'would' offer it except for the fact they can't. That's completely different to not accepting one as they want use as a person so an IR35 problem.

    If a fairly standard client won't accept a sub though then in this day and age I'd be worried. I don't think it's an automatic fail but with GSK going on, April 2020 coming and so on I would not be taking on a gig that won't allow a sub.
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  8. #8

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    On the last couple of contract reviews QDOS have done for me, the original RoS agency draft contract clause was a fail. From memory, the clause was changed to say that the client could only object to a proposed substitute on 'reasonable grounds'. As some have said above, it is a grey area but realistically there's no way you can force a client to take a substitute so a test of reasonableness is maybe the only defence.

  9. #9

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    Yes, I mean that is the actual test in case law. A right of substitution that is not unreasonably fettered. Obviously, based on the hypothetical contract, looking through any contract word collage.

  10. #10

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    Quote Originally Posted by northernladuk View Post
    Very grey area this one. It's been dismissed in case law as largely irrelevant in the past. It's also been called a sham by a judge yet it factored heavily in recent cases. It's often touted as one of the main pillars but even Kate Cottrell has said in the past it's a minor one.

    The test that has been using in past cases is that it is an option and in the contract. The fact it hasn't been used is irrelevant. It's there as an option. BUT... if you then ask your client further down the line and they refuse then you've just shot yourself in the foot. It's OK if it's unused, it's ruined if the client confirms they won't. There is the argument about breach of contract but that's another discussion.

    So who really knows. Bit of a case of 'do you feel lucky punk'.

    I do think however if people are giving out contracts with fettered RoS in this day and age then I think it's the tip of the iceberg and something else is wrong. It's well known enough to at least get the wording right. If they haven't bothered doing it right first time then what else is wrong with the contract?

    Rather annoyingly some clients like Bank of England deem all their contracts inside due them not being able to allow RoS dues to SC and security purposes. I think this is wholly wrong. They 'would' offer it except for the fact they can't. That's completely different to not accepting one as they want use as a person so an IR35 problem.

    If a fairly standard client won't accept a sub though then in this day and age I'd be worried. I don't think it's an automatic fail but with GSK going on, April 2020 coming and so on I would not be taking on a gig that won't allow a sub.
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