Actually using the right of substitution

[Wilmslow]

Firstly, has anyone actually done it, and, secondly, how did you do it and what would you do differently?

I am leaving for another role from current gig - agent did not chat with clientco until last minute. Agent has not been good with comms at all - frustratingly I would have had a 4 month extension offer but as I was not communicated with I did not know, which is why I have already signed up for another role. (Less money but I am committed to seeing it through, and it is also an interesting role which is why I am still going for it).

As it happens I have a good sub I used to manage on a previous role and we get on well and trust each other - we travelled together for a while. He is up for completing my contract - The benefits for clientco is that my knowledge and input will still be around to support them - major go-live in a couple of weeks. If he has a fresh contract it would take them longer for red tape and also mean my email access ends so cannot support the critical period.

These are not the actual numbers, but, say the rate is £500 and I pay my sub £450, how does this get handled in terms of my accountants and paying my sub?

The clientco could well end my contract and start a fresh contract instead of going for the sub route, in which case my life is a lot easier as I just walk. I am keen to explore the sub option to maintain a professional relationship during my upcoming gig, financially, and also to keep things fresh.

[MrButton]

Afaik from the accountancy side you just invoice your client as you normally would and your sub invoices you and you pay the invoice as you would any expense.

Almost everyone at my current gig uses subs when on holidays.

[Lurker101]

Afaik from the accountancy side you just invoice your client as you normally would and your sub invoices you and you pay the invoice as you would any expense.

Yes, pretty much exactly this. I have been running 2 contracts for the same client over the last 9 months. My sub is operating through a brolly and invoices me monthly whilst I invoice on the 2 contracts. Once you come to submitting your micro accounts then the subs costs are a cost of sale.

I would be think carefully about public sector subbing due to the IR35 rules as you could become part of the supply chain and the determination of the status. I am in the public sector and both of my contracts are outside of IR35 but as my sub is through a brolly I don't need to determine his status.

[billybiro]

Firstly, has anyone actually done it, and, secondly, how did you do it and what would you do differently?

I suspect very few people actually have done it.

Here's the test. Irrespective of your Ltd's name, does your personal name appear on the contract anywhere? (Hint: It's usually near the beginning where terms are defined naming you, personally, as "the consultant"). If so, your "right of substitution" is almost certainly a sham. In this case, you'll almost certainly also find a clause that stipulates that the "contractor" (i.e. your Ltd.) may supply services via a different "consultant" but that the client has the right to reject the supplied "consultant" if they don't meet some arbitrary (and very frequently undefined) conditions entirely imposed and controlled by the client. This is the reason very few people have actually substituted as approx. 99% of all contracts are like this.

You'll know you've got a "real" right of substitution if the only name that appears on the contract is that of your Ltd. and your personal name is not mentioned at all (save for your name next to the place to sign as a representative of your Ltd.) and there's no further clauses restricting the "contractor's" ability to supply services to the client via any means they so choose.

Having a sham RoS doesn't mean you can't do it, of course, but you need a client who is amenable to having a different person physically show up on their site to perform the work. Again, given that 99% of clients view contractors as "temporary permies", you're highly likely to meet with a lot of resistance (this is why they interview you for the gig, not you as a representative of your Ltd). Still, if you want to have a go, you simply speak to the client and inform them that you'd like to send along a different "consultant" for the next 4 months of the gig. Be fully prepared, though, for the client to immediately retort with, "No." which you'll simply have to accept (and thereby showing up the RoS clause for the sham it is).

What does your contract say?