When the client scews the result to put you inside IR35

[DKB]

A friend of mine is working for a Government body who decided that they would use the Employment Status Checker tool provider by HMRC to determine each ltd contractors status.

They've changed tact slightly and have now emailed all contractors and asked (well, copied and pasted from the tool itself) if they substituted, who would pay the substitute?

They have made a rule that if the contractor says they will pay the substitute then they can remain outside IR35, but if they answer that the client pays the substitute then the contactor will be deemed inside IR35.

The issue with this of course is that you can answer the questions on the tool by saying the client won't allow substitution or that it is allowed but the client pays them and you can still be outside IR35 if you're not managed and choose how, when and where you do your work from etc etc.

I can see how this is a nightmare for PS organisations, but can they just make up their own rules to determine your employment status? To make a blanket statement is one thing but to make up your own criteria of what's 'In' seems pretty iffy to me!!

Thanks

[SueEllen]

He who pays the piper calls the tune...

[MrMarkyMark]

A friend of mine is working for a Government body who decided that they would use the Employment Status Checker tool provider by HMRC to determine each ltd contractors status.

They've changed tact slightly and have now emailed all contractors and asked (well, copied and pasted from the tool itself) if they substituted, who would pay the substitute?

They have made a rule that if the contractor says they will pay the substitute then they can remain outside IR35, but if they answer that the client pays the substitute then the contactor will be deemed inside IR35.

The issue with this of course is that you can answer the questions on the tool by saying the client won't allow substitution or that it is allowed but the client pays them and you can still be outside IR35 if you're not managed and choose how, when and where you do your work from etc etc.

I can see how this is a nightmare for PS organisations, but can they just make up their own rules to determine your employment status? To make a blanket statement is one thing but to make up your own criteria of what's 'In' seems pretty iffy to me!!

Thanks

I thought that was the true definition of a proper sub anyway.

Your Co gets paid by the client, YourCo then pays the sub.

[DKB]

That was kind of my view, they can do what they like.

He's ok as he can substitute and happy to put any sub through his company so deemed outside still. We both agreed it seemed a bit underhand For the uninformed to pick and choose what what aggregation of results deem somebody in or out rather than just let the tool do the work. Jeez!

[MrMarkyMark]

That was kind of my view, they can do what they like.

He's ok as he can substitute and happy to put any sub through his company so deemed outside still. We both agreed it seemed a bit underhand For the uninformed to pick and choose what what aggregation of results deem somebody in or out rather than just let the tool do the work. Jeez!

PS though, right

[DKB]

I thought that was the true definition of a proper sub anyway.

Your Co gets paid by the client, YourCo then pays the sub.

That's my definition of it too, you're not subbing if you're not paying the sub.

The issue is....and it's appreciated that the tool is a guide and not an official review....but you can say the client pays the sub or that it's never happened the tool still shows you as being out. I personally don't necessarily think that's wrong, it's just that the end client on this occasion has used the tool to assess contractors and has made their own criteria to put people inside

[DKB]

PS though, right

And therein lies the problem

[northernladuk]

A friend of mine is working for a Government body who decided that they would use the Employment Status Checker tool provider by HMRC to determine each ltd contractors status.

They've changed tact slightly and have now emailed all contractors and asked (well, copied and pasted from the tool itself) if they substituted, who would pay the substitute?

They have made a rule that if the contractor says they will pay the substitute then they can remain outside IR35, but if they answer that the client pays the substitute then the contactor will be deemed inside IR35.

Not seeing what the problem is here. So many contractors don't have a clue what subbing is so to reduce the risk of a contractor crying foul and putting the client in a position they have made it clear.

The issue with this of course is that you can answer the questions on the tool by saying the client won't allow substitution or that it is allowed but the client pays them and you can still be outside IR35 if you're not managed and choose how, when and where you do your work from etc etc.

But you don't use the tool so why is that is this an issue?

I can see how this is a nightmare for PS organisations, but can they just make up their own rules to determine your employment status? To make a blanket statement is one thing but to make up your own criteria of what's 'In' seems pretty iffy to me!!

Thanks

Can't see how they are making up the rules. They are clarifying the substitution process to make reduce their risk. In fact it's great surely. They are are showing they are more than happy to accept a sub. No worries of it being a sham even if it's not your risk anymore.

It's a shame they didn't go one step further and point out they expect the contractor to bring the sub up to speed at their own cost and time. Leaving Friday and another body turning up Monday isn't subbing. If not that some will think the other person turns up and they work together with the client paying both of them.

I don't see a problem here at all. What am I missing?

[DKB]

Can't see how they are making up the rules. They are clarifying the substitution process to make reduce their risk. In fact it's great surely. They are are showing they are more than happy to accept a sub. No worries of it being a sham even if it's not your risk anymore.

I don't see a problem here at all. What am I missing?

There is of course absolutely nothing wrong with clarifying the rules and safeguarding themselves. The issue is that hiring managers don't know anything about IR35 so have taken proactive steps to determine contractors employment statuses by using HMRC's tool to assess each person.

They have found that when they answer questions on the substitution clause, selecting 'it's never happened' or 'the end client pays', makes no difference to the end result, each one is found outside of IR35 as they aren't managed, choose how they want to do the work and where from etc. I'm no expert on IR35, but if the tool deems these people to be out of IR35, then I'd assume that this could be fairly accurate, it's HMRC's tool based on logic they have provided around the legislation.

So despite people being deemed outside by the very tool created by HMRC to guide people through, that organization is now saying that IR35 is only determined by who pays a sub if one is provided.

Those contractors who can/will pay a sub will fall outside, those that say no will fall inside, simple. However, this isn't the issue, it's not to do with people being found inside or out it's to do with changing goalposts. If HMRC don't necessarily put people inside based on this (as proved by the tool they provide), then how can it be ok for an organisation to make up their own view of what constitutes being inside or out because they didn't like the original outcome.

[northernladuk]

They have found that when they answer questions on the substitution clause, selecting 'it's never happened' or 'the end client pays', makes no difference to the end result, each one is found outside of IR35 as they aren't managed, choose how they want to do the work and where from etc. I'm no expert on IR35, but if the tool deems these people to be out of IR35, then I'd assume that this could be fairly accurate, it's HMRC's tool based on logic they have provided around the legislation.

And there is the bit you aren't getting. The clients aren't fully versed on IR35, that's to be expected but the tool is just a guide. It's never meant to be definitive. If you are 'assuming' something is 'fairly accurate' would you put yourself at risk by taking it as a given? I certainly wouldn't, hence the client further steps. Sometimes those steps are rubbish, sometimes they aren't. That's not really our call.

The comment 'HMRC's tool based on logic' should strike fear in to anyone that is even remotely touched by all this.