Contract Review - Deemed Failure

[Bumfluff]

Of the three points to determine IR35, in my experience, Substitution is the easiest to prove but the hardest to demonstrate unless you actually do it. For example, if you are engaged to write a website - and you subcontract the work to a company in India. Would the client need to know or care? Obviously this all depends if you are charging a day rate or a fixed rate etc. In reality - substitution is the holy grail if you actually do it otherwise don't rely on it. As you are going directly to your client - why not ask them 'Would you accept a substitute for me if I were unable to perform the services personally'.

Control is probably the easiest one for a genuine contractor. You are told what to do and just get on with it, guiding the client as to the best way to approach the task e.g. you control the 'how' and 'when' and so on. This usually helps if you are taken on to do a specific project or even for a specific level of experience / expertise the client just doesn't have. Unfortuantely, most support staff e.g. System Admin's or DBA's fall foul of this as their level of control is usually no more than that of an equivalent employee (they work with same helpdesk / change control systems, to same timescales etc).

MOO can be equally straight forward but a number of court cases show that MOO should happen within a contract e.g. the client decides that during the last two weeks of December, your services are not required - thus although you are able to work in that period and the contract covers this period, the client has demonstrated they have no obligation to give you work or to pay you even if you are available. If you turned up - they wouldn't have to pay you! People caught under 'control' can use 'MOO' - but again, it's usually required to actually have happened.

The rules say that any one of these is enough to put you on the borderline of exclusion from IR35 and by adding the fact of how you run your business - could be enough (or make is sufficiently doubtful for HMRC to risk proceeding further).

As the courts say, the only real way to determine IR35 is to paint a picture of your activities, using the above three criteria as a foundation - and not to rely on any one point of a contract. If HMRC smell a rat with the contract - they can and will discount your contract as a sham and then create their own, unflattering one.

re MOO most of the banks in the last few years have this told contractors they are not to come in last 2 weeks of December or during summer months as it was "business strategy to ensure efficient use of resources", so contractors off during quiet times but permies in. This is not the same as compliance leave.

Also alot of the banks have been expressing how contractors fit into there strategy for example I have paperwork stating "Contractors are still core to the overall strategy as they provide flexibility amd specialest skills on a short term basis".