Right of substitution - IR35 status

[dmitri_k]

Hello,

Got my 1st contract, which lasts for 1.5 months. One of the points in the contract says:
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3.2 The Contractor warrants that the Services shall be initially performed by such Personnel named in the Assignment Schedule. The Contractor may propose a replacement to perform the Services in substitution for the named Personnel, but any such proposed substitute shall only be accepted if the proposed replacement has the necessary qualifications, skills and experience and this is approved in writing by the Client.
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My accountant advised me that due to the fact that it says "approved in writing" will definitely make the contract inside IR35. That was the only point in the whole contract.

I also have my own online business apart from being a contractor, would that count as well if I am being investigated?

I had to go with the contract as it is as was difficult to change that clause. Now I have a choice to pay myself as outside of IR35 or as normal PAYE with high tax.

I had a read on a number of websites and think that I am safe. What do you think?

Cheers

D

[Gonzo]

Get some perspective

Hello,

Got my 1st contract, which lasts for 1.5 months. One of the points in the contract says:
================================================== ========
3.2 The Contractor warrants that the Services shall be initially performed by such Personnel named in the Assignment Schedule. The Contractor may propose a replacement to perform the Services in substitution for the named Personnel, but any such proposed substitute shall only be accepted if the proposed replacement has the necessary qualifications, skills and experience and this is approved in writing by the Client.
================================================== ======

My accountant advised me that due to the fact that it says "approved in writing" will definitely make the contract inside IR35. That was the only point in the whole contract.

I also have my own online business apart from being a contractor, would that count as well if I am being investigated?

I had to go with the contract as it is as was difficult to change that clause. Now I have a choice to pay myself as outside of IR35 or as normal PAYE with high tax.

I had a read on a number of websites and think that I am safe. What do you think?

Cheers

D

For a one and a half month contract it is not going to make a lot of difference unless you are on stupid money.

Unfortunately, you have sought advice and that advice is that the contract is inside IR35, so if you ignore that advice and don't pay up all the inside IR35 taxes then it could be treated as deliberate tax evasion which is a whole extra load of tulip that you don't want.

Just my opinion, I am no expert.

[Denny]

Basically, a fettered right of substitution is very often just a way of saying 'no' without saying it directly.

The best way of thinking about it is to imagine you are signing up with a firm of accountants: say Mr Williams of Nixon Williams, for example. Now he will simply allocate a member of his accountancy team to carry out the work as your account manager (assuming that is how they work). Does he need your permission in writing to do this? No. This isn't simply because they have their own premises either.

The other thing about a fettered RoS written like it is in your contract is that it strongly implies that you have to work on site as well. Otherwise, why would you need permission if you have your own premises or can shove some work to someone else who works from their office or home? The client wouldn't even know about it if you were the principal point of contact. So D&C is implicit in your fettered RoS as well, if a client needs to sign it off. This implies the responsibility for the sub is passed to the client, not you, and it strongly implies you are in a job, not doing expert services to sell back to the client. All of these were primary considerations in the latest Dragonfly case.

If the contract said that you, the named contractor, would initially perform the task, but may substitute during times of pressure or to carry out other work, but must undertake to ensure that your sub is suitability qualified and that you take all responsibility for their work, and would do or arrange any substandard work to be brought up to standard free of charge in your own time without cost to the client, this would still be 'fettered' but does not pass responsibility back to the client. So it would still be outside ir35.

Yours is not written that way though.

[Fishface]

this text should clearly put you outside -

"The work undertaken is NOT made of hire"

means you are not controlled - thus independant.

[Ruprect]

For a one and a half month contract it is not going to make a lot of difference unless you are on stupid money.

Unfortunately, you have sought advice and that advice is that the contract is inside IR35, so if you ignore that advice and don't pay up all the inside IR35 taxes then it could be treated as deliberate tax evasion which is a whole extra load of tulip that you don't want.

Just my opinion, I am no expert.

I think this advice is misguided and scaremongering.

[ASB]

My accountant advised me that due to the fact that it says "approved in writing" will definitely make the contract inside IR35.

I hope you are misquoting your accountant. The fact that the right of substitution is fettered may make it more likely that it is caught. It does not make it caught. It all depends on the rest of the contract and the actual working arrangements.

If it is only 6 weeks the short duration *tends* to make it less likely to be viewed as course (it was once stated in the house that < 1 month was not caught but I can't be bothered to find the reference in hansard).

[dmitri_k]

Looking at what I’ve researched so far and what people are saying over here, it looks like I am falling inside IR35 on this one.

But as ASB pointed out, that it makes it more likely to be inside, but does not make it inside and all the points will be considered, i.e. that I am running an online business as well as being a contractor and use profits from one side of the business to invest in another.

I am thinking to call HMRC see what they think. Is that a good idea?

[Hex]

I am thinking to call HMRC see what they think. Is that a good idea?

It's a very bad idea. Get the contract professionaly reviewed instead.

[fridge]

I am thinking to call HMRC see what they think. Is that a good idea?

It's a very bad idea. Get the contract professionaly reviewed instead.

B&C

[Qdos Contractor]

Is there no way the agency will agree to change the clause? You'd just need to remove 'and this is approved in writing by the Client', which isn't a huge amendment. The rest of the clause is absolutely fine.

Don't call the Revenue.