Agency contracts in light of IR35 defeat

[richy]

Hello all.

I'm aware of several agencies [Optimus, WA Consultants, Progressive] which sign contracts with end clients which fail IR35 for a number of reasons [checked by QDos]. How does this affect myself as a contractor with my IR35 compliant contract between my ltd and one of those agencies?

I'm thinking about this a bit more after the Dragon fly loss:

http://www.shout99.com/contractors/s...le.pl?id=53666

rgds, Richy

[The Lone Gunman]

Hello all.

I'm aware of several agencies [Optimus, WA Consultants, Progressive] which sign contracts with end clients which fail IR35 for a number of reasons [checked by QDos]. How does this affect myself as a contractor with my IR35 compliant contract between my ltd and one of those agencies?

I'm thinking about this a bit more after the Dragon fly loss:

http://www.shout99.com/contractors/s...le.pl?id=53666

rgds, Richy

Our contracts are not worth the paper they are written on, it is the real working practice that matters. Dragonfly reinforces this. Sometimes I think we would be better with verbal agreements only. I intend to try and discuss terms at interview stage from now on and hopefully get written confirmation.

Your contract allows for 2 things.
1. You can show the tax man due diligence by having it checked so when you sign your tax form as outside IR35 you were sure you were correct. This means the tax man should not hit you for penalties.
2. You can sue the arse off the agent for misrepresentation should your contract turn out to be a sham.

[richy]

Our contracts are not worth the paper they are written on, it is the real working practice that matters. Dragonfly reinforces this. Sometimes I think we would be better with verbal agreements only. I intend to try and discuss terms at interview stage from now on and hopefully get written confirmation.

Your contract allows for 2 things.
1. You can show the tax man due diligence by having it checked so when you sign your tax form as outside IR35 you were sure you were correct. This means the tax man should not hit you for penalties.
2. You can sue the arse off the agent for misrepresentation should your contract turn out to be a sham.

Thanks for the reply. Due diligence is good

The other wonder I had, as I've got a new client (with IR35 fail contract again). Is it worth then putting it through an agency just to get an IR35 pass contract? Even though that agent is going to take 8% as their margin? .. the alternative is my QDos policy being invalidated cos I was operating with failing contracts.. although then the client's IR35 fail contract is still signed by the agent..

[malvolio]

Dragonfly still worries me, but for a different reason. The commssioner's views on RoS are dodgy enough, his view on MOO was seriously perverse; in effect the ignored the "No work, no pay" and replaced it with an entirely theoretical idea that since the AA always had work to be done, they would always be requied to pay their contractors. I have no idea why that wasn't challenged, since it is more out of step with established case law than anything else.

I think this one will run and run. Only good thing is that by stopping at the SC it hasn't established any new case law, itself a good reason to leave it alone since taking a challenge to the High Court might seriously backfire.

[tim123]

Dragonfly still worries me, but for a different reason. The commssioner's views on RoS are dodgy enough, his view on MOO was seriously perverse; in effect the ignored the "No work, no pay" and replaced it with an entirely theoretical idea that since the AA always had work to be done, they would always be requied to pay their contractors. I have no idea why that wasn't challenged, since it is more out of step with established case law than anything else.

I think this one will run and run. Only good thing is that by stopping at the SC it hasn't established any new case law, itself a good reason to leave it alone since taking a challenge to the High Court might seriously backfire.

You must be talking about something else because the High Court certainly seem to think that they have ruled on "Dagonfly"

http://www.bailii.org/cgi-bin/markup...2008/2113.html

And FWIW, I don't agree that the judge moved the goalposts wrt MOO. He may have moved them from your understanding, but that is because your understanding was wrong. There is plenty of previous cases to show that that MOO is not as simple as "not getting paid if you do no work".

tim

[malvolio]

AIUI it simply upheld the original ruling and so has not changed existing case law. ICBW

It also did not discuss MOO which was not part of the appeal but arguably should have been. The challenges were on RoS - clearly unsupportable in this case - and D&C where things got a little confused (to say the least) partly because of poor wording in the original contract.

Nevertheless, this case like all IR35 cases is decided on interpretation of extremely vague guidance, using criteria not originally established for that purpose and by creating notional contracts that can, as here, contradict the actual contracts signed by all parties in good faith. IR35 remains unworkable and unjustifiable.

[tim123]

AIUI it simply upheld the original ruling and so has not changed existing case law..

That's not my understanding.

The original ruling did not create case law (it does create a compelling argument for the benefical party, but not one that would be guaranteed to win)

But AIUI taking it to appeal and losing, turns it into case law.

It also did not discuss MOO which was not part of the appeal but arguably should have been. The challenges were on RoS - clearly unsupportable in this case - and D&C where things got a little confused (to say the least) partly because of poor wording in the original contract.

And there was me thinking that it was the actual working practices that were most important

tim

[malvolio]

Actually it's both, they now seem to use working practices as the arbiter and the contract where there is ambiguity, which I suppose is fair enough. Clearly they thought D&C was present in reality (becasue a tester's work was subject to QA checks, mainly, which seems just a little tenuous) and quoted the contract to support their view

[Emigre]

Actually it's both, they now seem to use working practices as the arbiter and the contract where there is ambiguity, which I suppose is fair enough. Clearly they thought D&C was present in reality (becasue a tester's work was subject to QA checks, mainly, which seems just a little tenuous) and quoted the contract to support their view

I happen to work via a different scheme but if I was through a Ltd Co I would be outside IR35 on a working practices basis, largely because there is little or no direction from end client management. This is because they are not interested in the particular project (its neither IT nor career positive!) that I'm working on. Progress meetings are feedback rather than direction. The real problem though is that put in front of the Commissioners/Court I'm certain that end client would portray a very different perspective (ie the guy I report to would infer that he was completely on top of everything etc etc).

In other words, however secure you may be in being outside IR35 you will still rely on end client to endorse it. That's one hell of a risk, and one that will nearly always work in HMRC's favour.

[tim123]

Actually it's both, they now seem to use working practices as the arbiter and the contract where there is ambiguity, which I suppose is fair enough. Clearly they thought D&C was present in reality (becasue a tester's work was subject to QA checks, mainly, which seems just a little tenuous) and quoted the contract to support their view

You saw different evidence to me.

The evidence that I saw said that he was under D&C because he was asked, on an ad hoc basis, "to run text X *now*".

This seems a reasonable enough ruling to me. It's not HMG's fault that the client wants a permatemp.

ISTM if a contractor wants to be outside of IR35 (on the D&C rule) he has to avoid jobs that expect this. But IME this cuts your potential clients down considerably.

YMMV.

tim