Right to substitution

[tigerinhunt]

Hi,

In my contract, following is written regarding right to substitution. I am looking for your opinion on how good this is as far as IR35 is concerned.

"The contractor shall be entitled from time to time to offer a replacement Consultant to perform the services. However, <agency name> shall be under no obligation to accept any such replacement if in its reasonable opinion or the opinion of the client such replacement is not suitable".

No obligation due to unsuitable replacements sounds fine to me, but please suggest if in your opinion this is a good enough right to substitution clause in the contract.

Thanks in advance.
tigerinhunt

[northernladuk]

Have you offered this or did it come in your contract?

As far as I see this is pretty worthless but note I am not a lawer or expert. I will explain why I think this.

Firstly the comment time to time is pretty wooly and won't stand up to anything imo.

Also you are still giving the client/agent control over the substitution which still looks like you are being controlled. This paragraph explains with link to full discussion below..

The Issue of Control
''But equally important is the issue of control,'' May adds. ''Does the client decide who the substitute is, or do you? Does the client have the power to refuse the substitute? If the client has too much control over the substitution process, the court may claim that the client is simply looking for another employee like yourself. So do retain the right to find and furnish the substitute yourself in the contract.''

Another clause to avoid would be one involving client approval or satisfaction, usually worded: 'the right to substitute another representative of the Company to provide the Services provided that the Client is satisfied that the proposed substitute possesses the necessary skills, expertise and resources to perform the Services'

''This isn’t necessary,'' Royden continues, 'because if the client isn’t satisfied with the substitute’s services, then your company is responsible no matter what. There is the possibility of breach of contract.'' You should at no time suggest that the client has control over the provision of services that you make.

link --> <snip>

This is also reflected in this page..

<snip>

I did a google for Substitution Clause example contractor' and loads of stuff came up.

HTH

[BolshieBastard]

Hi,

In my contract, following is written regarding right to substitution. I am looking for your opinion on how good this is as far as IR35 is concerned.

"The contractor shall be entitled from time to time to offer a replacement Consultant to perform the services. However, <agency name> shall be under no obligation to accept any such replacement if in its reasonable opinion or the opinion of the client such replacement is not suitable".

No obligation due to unsuitable replacements sounds fine to me, but please suggest if in your opinion this is a good enough right to substitution clause in the contract.

Thanks in advance.
tigerinhunt

If the contracted T&C's are as you state that the agency shall be under no obligation to accept the sub, I'd be very worried.

This looks to me a sham condition because its the client who needs to OK the subs not the agent. Even so, I'd suspect your contract will say one thing about subs but the client \ agent contract will say something completely different. And that's an IR35 fail.


For the sub clause to be strong, you need your contract with the agent to say the same thing about subs as the client \ agent contract.

[MPwannadecentincome]

If the contracted T&C's are as you state that the agency shall be under no obligation to accept the sub, I'd be very worried.

This looks to me a sham condition because its the client who needs to OK the subs not the agent. Even so, I'd suspect your contract will say one thing about subs but the client \ agent contract will say something completely different. And that's an IR35 fail.


For the sub clause to be strong, you need your contract with the agent to say the same thing about subs as the client \ agent contract.

But the contract is between the contractor and the agent, they are the signatories, neither party can place obligations or otherwise on a third party who is not a signatory to the same contract.

[philip@wellwoodhoyle]

But the contract is between the contractor and the agent, they are the signatories, neither party can place obligations or otherwise on a third party who is not a signatory to the same contract.

The HMRC v Dragonfly case proves the opposite I'm afraid - in that case, it was the end-client's understanding of the situation re substitution that mattered - in fact the agency/contractor contract was fine but the end client said they wouldn't accept a substitute, so IR35 was held to apply.

You have to remember that IR35 is a tax law - you are quite right from a legal position, but for tax purposes, it is the working relationship that matters, not what the contract says.

[tigerinhunt]

thanks everyone.

I have got them agreed to change the wording to:

"If contractor were unable to perform the services himself and can provide a suitable replacement with equivalent skills, product knowledge and experience, then client and agent should have no objection to the replacement. Contractor would be responsible for all the knowledge transfer and training of the replacement contractor/consultant."

Plus I am making sure they have the similar wording in the agency-client contract.

Let me know what do you think now.

Regards,
tigerinhunt