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ladych
19th April 2004, 23:30
Sorry if this is old news... I'm just ending a period of permiedom (not a good move) to return to contracting (hurrah!) but am confused about the consensus on IR35.

Many contractors I know are clearly 'caught' according to the real client/contractor relationship but are relying on contract wording to declare themselves outside - is this a sensible approach or am I right in thinking that the wording of the contract will be ignored by the revenue who'll only consider what actually happened? :\

Simon SJDaccountancy
20th April 2004, 08:55
The wording of the contract won't be ignored by the Revenue, but they will almost always want to make sure that the actual relationship is along the lines of the contractual one.

Unfair as most contractors won't have a clue about what has been agreed by the agent and end user, but this approach has been validated in recent case law.

eAZy
20th April 2004, 10:06
I would suggest that you need to get your contract reviewed by ir35 specilaists like Simon.

IR will look at the working practices only if they cannot deem you caught purely based on the contract - so it it is important to have a good contract.

It may be prudent to get IR35 investigation insurance, as the cost can be quite high, especially if you have to go all the way to commissioners (5-10K). PCG's Route35 is good value for money.

partimer
20th April 2004, 15:31
I not sure what everybody else thinks but I've always thought that if you could prove you were in business of your own account then things would be a heck of a lot easier.
For example, working 4 days consultancy at one customer and one day at another different customer.

Most permies are specifically excluded from working for anybody other than their 1 employer.
What worries me is that the IR are trying to get you to treat each contract separately.
How on earth can you be a disguised employee if you have two simultaneous contracts ???
(Imagine two simultaneous contracts but both within IR35 - according to the IR)

It's like changing the rules until you are found within IR35.
Total BS in my opinion since you can get two IR inspectors giving you two different answers on the same contract.

oaksoft
21st April 2004, 00:13
IMO, if you are going to sign contracts which effectively supply a person for a set period of time for unspecified "duties" then it going to be very hard to get out of IR35.

If, however, you are signing a contract for your company to perform a single agreed and documented task (specified in the contract) then you are more likely to find the IR looking at you in a different light.

The first inherently brings D+C because you have almost certainly unwittingly agreed to effectively do whatever the client needs for a set period of time - i.e. same as a fixed term employee. You then end up fighting the losing battle of "but I'm an expert, how can they control me?" because the IR will say "in the same way he controls his other senior employees - it doesn't stop you being an 'employee' ".

The 2nd case means the client cannot by law direct or control you as the task is already set out in the contract. This effectively stops the "Paul, I want you to clean the ladies toilets with a blue tits eyelash" nonsense because I can simply either refuse to do so OR draft up another schedule to cover that 2nd piece of work. This makes it clear that YOU or your company is deciding what work gets done and not the client.

I believe this is the line LawSpeed have been promoting for a while now.

It's the usual problem, if you look and act like a permy or a fixed term employee then you'll be stuffed or you'll be extremely lucky and be overlooked - it is that simple. Why take the risk for the effort of a few words on the schedule explaining why on earth Client A has taken you on?

partimer
21st April 2004, 09:40
Oaksoft,

I hear what you're saying but if in your contract you have "to work on project A".
If project A is held up for whatever reason and the customer give you some other work to keep you busy and not waste their money, could you seriously reject the work ? (and annoy your customer and potentially get terminated).
I wonder how many contractors would get up and say, "I'll come back when project A is ready to start" ?

It's this "real working practise" that the IR try to argue with.
I really don't know since I'm beginning to believe IR35 is getting even more ambiguous with each case.

(An example for the above is when some hardware didn't arrive and we were left hanging around for a week or two).

Any thoughts greatly appreciated.

whats in a name
21st April 2004, 09:55
Personally I think that ir35 is going to hit 90%+ of contractors. If you sign up for a time based contract on a client site they will get you.

Project based working is all very well, but isnt possible for most contractors. Certainly not the support people.

If you do go for project based stuff the risk levels go up, and I think it is much more difficult to exist as a single player. The costs for both contractor and client also go up with more administration needed for contract management.

If you are in effect doing the same job as a permie, ir35 is coming to get you.

I still think the way forward is operating as a composite or as a partnership with others. However every attempt to do this that I have seen founders because too many contractors are too greedy.

ladych
21st April 2004, 10:30
Thanks for the comments.


I still think the way forward is operating as a composite or as a partnership with others.

If another contractor operates a Ltd co. with several employees (numbers varying over time but sometimes zero) and took me on as an employee (but on a PAYE + dividends basis)..

Do you think this would alter the IR's view or would they still be looking at the relationship between myself and the client?

If I was deemed to be 'caught' would this have any impact on the other company employees (who are deemed to be outside)?

oaksoft
21st April 2004, 11:09
In response to partimer...

At my last client I had to work on project A as well. Here is how I handled that.
They are paying through the nose for a specific resource to fill a specific role. During the interview I merely asked them in detail what that specific role within project A was for.

e.g. Project A is a full availability database. They wanted me to work on that. Specifically, after questioning them, they wanted me to design a SCSI front end to handle data routing and configuration. That task involved architecture, design, coding, unit testing and integration testing. I merely added this detail to the schedule as my task with the contract duration of x months or completion of task depending on which happened first. This legally stopped them putting me onto task B without my agreement.

Now if Project A had been cancelled they may have asked me to work on Project B. I'd have repeated the above and created a new task description. That would then be put on a new schedule with a new end date perhaps. The new task might have been "integration testing of product B to test spec B". Again that would have stopped them forcing me onto Project C without my agreement.
Alternatively, I may decide that I don't want to waste x months doing task B. The point is that it is my choice. Even though I have no termination clause for the x months, the fact that Project A has ended means that my contract has also ended and so I can leave without notice or penalty. This removes MOO and D+C at a stroke. At this point the IR are simply not going to bother me anymore.

You can see that this basically removes the clients right to Direct and Control on a day to day basis. They can't tell me what to do on a day-to-day basis because the contract states exactly what I am there for. Most contracts do not have this.

I utterly disagree with another poster here who said it was next to impossible to get a task agreed. If your method of working is to find out what the client needs you for then your job is a really easy admin thing and need not involve the client at all. If however you just agree to blindly turn up and do "work" for a set period of time then you are allowing yourself to be at the beck and call of the client on a daily basis. This is precisely the type of person the IR are trying to catch IMO because they are largely indistiguishable from employees or fixed term employees.

Hope this helps.

fiddleabout
22nd April 2004, 08:33
ladych

This took me on as an employee (but on a PAYE + dividends basis).. shows that you need to do a lot of reading up about employees dividends etc.

If you work PAYE through another contractor it is highly unlikely that you will get any dividends. To get a dividend you need to be a shareholder. To get a dividend related to only your contribution you would have to have a different class of share from other "employees". This is the old way umbrellas used to operate and it was naffed up by some law/regulation/whatever a long time ago making it an unusable option.