Confirmation of Arrangements letter (sample feedback)

[dagenheis]

I am working for a client (through an agency) and had my contract reviwed. It was concluded as outside IR35, giving us right to substitution, control except supporting client in core hours, onsite presence and MOO.

Now I am persuading the client to sign the Arrangemengts letter. As discussed in earlier thread, I am using QDoS template, and wondering if someone can advise on few responses to see if they make sense to demonstrate that's it's not employment relationship. e.g. In regards to loss/damage, their response is no as the work is not related to mission critical systems (life sciences etc).

Cheers,

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Does the service provider have the right to undertake the work using any workers of the service provider’s own choice and at the service provider’s own expense, provided the workers concerned have the requisite skills? Yes


Does the service provider have the right to subcontract the services to another person, firm or company, provided the subcontractor has the requisite skills? No


If the services have to be provided at a place decided by the customer or client, what are the reasons? "To be able to work with the in-house team and other service providers, and participation in meetings/workshops"

How are the working hours decided? By the service provider/by the customer or client/by mutual agreement? "By mutual agreement but need to support the client during core business hours."

Does the customer or client have the right to instruct the service provider to do other work not included in the services described at (2) above? No

Does the customer or client have the right to instruct the service provider about working methods? No


What is the nature of any rules or procedures governing the customer or client’s own workforce that also apply to the service provider? "To provide services in line with the end customer requirements such as project templates and process framework."

What is the nature of the equipment that has to be supplied by the service provider? None

What is the nature of the equipment that has to be supplied by the customer or client? Laptop to ensure that the client's corporate software and security policy are followed to have adequate access to the corporate network similar to other project members/service providers.
Does the service provider have an obligation to compensate the customer or client for any damage or loss caused by the service provider’s negligence? No

Does the customer or client expect the service provider to rectify any defective work at the service provider’s own expense? Yes

Does the customer or client prevent the service provider from doing work for other customers or clients during the course of the engagement? No

What is the nature of any benefits provided to the customer or client’s own employees that are also made available to the service provider? None
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[Gemma at Qdos]

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Does the service provider have an obligation to compensate the customer or client for any damage or loss caused by the service provider’s negligence? No A limited company should be held accountable for their actions. If your company caused a financial loss to the client due to negligence, it is expected to be recovered by your company. This is where Professional Indemnity Insurance comes in and shows financial risk as a company. If you were required to have PI insurance for the contract, this would demonstrate that you are taking a financial risk.

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That one question alone will not put you inside IR35 and is a defendable point as they have agreed in the question about rectifying your work at your own expense. If you hold Professional Indemnity insurance as well, this will demonstrate that you take financial risk as a company.

Hope this helps

[GB9]

Does the service provider have the right to undertake the work using any workers of the service provider’s own choice and at the service provider’s own expense, provided the workers concerned have the requisite skills? Yes


Does the service provider have the right to subcontract the services to another person, firm or company, provided the subcontractor has the requisite skills? No

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What's the difference between these 2 and why do they have different answers?

[jamesbrown]

What's the difference between these 2 and why do they have different answers?

The first question is about the right to substitution (i.e. for YourCo to provide another qualified worker). The second question is about the right to subcontract. They are two different things and, while some clients may allow substitution (at least, in theory), they may not allow the work to be subcontracted to another company.

[GB9]

The first question is about the right to substitution (i.e. for YourCo to provide another qualified worker). The second question is about the right to subcontract. They are two different things and, while some clients may allow substitution (at least, in theory), they may not allow the work to be subcontracted to another company.

Have to say I don't fully understand the difference.

If your company has another employee on its books, then I can see number one being applicable. However, if you don't then you would probably be looking to get in another contractor working through their own Ltd Co. The second clause effectively blocks this, thus failing the substitution allowance that the previous clause provides for.

[jamesbrown]

Have to say I don't fully understand the difference.

If your company has another employee on its books, then I can see number one being applicable. However, if you don't then you would probably be looking to get in another contractor working through their own Ltd Co. The second clause effectively blocks this, thus failing the substitution allowance that the previous clause provides for.

This essentially comes down to the differences between assigning, subcontracting and substituting. The differences may be subtle, in practice, but the essential point about providing a substitute is that you provide one through YourCo as an "alternative you", and you then invoice the client as normal (this is completely transparent to the client). A substitute covers the work you would otherwise have completed (e.g. because you were ill), which clearly demonstrates a lack of personal service. Subcontracting is also a positive pointer towards lack of personal service and being in business, but it may not cover work that you would otherwise have completed (e.g. it could require a different skill-set). In general, the recommendation is to have a distinct clause for substitution that is not unreasonably fettered. Hence, there are two separate questions above. However, since Gemma@QDos is commenting in this thread, I'm sure she can explain more fully

[Gemma at Qdos]

That's exactly right jamesbrown. As a limited company contractor, you should be able to substitute yourself (but not your company) to carry out the services that your company has been contracted to do (and your company would be responsible for paying them), thus showing that it is not your personal service that is required but the service of your company, as it is your company that has been contracted, not you as a person. The substitute does not have to be employed by you at all times, but will have to be employed by your company for the purpose of the substitution.

The right to subcontract is different as this displays the right for a company to contract a different company, i.e passing on the work to another company which was not contracted. This is generally not accepted as the client has contracted your company and are generally not happy just being given another company to fulfill the work. The right to subcontract is not a golden point, it is more of an extra that improves upon the perception of your IR35 status but the right to substitute is the important one.

[GB9]

The substitute does not have to be employed by you at all times, but will have to be employed by your company for the purpose of the substitution.

The right to subcontract is different as this displays the right for a company to contract a different company, i.e passing on the work to another company which was not contracted.

The above highlights the confusion. Unless you are going to get someone PAYE onto your company books, the only other way I can think of is getting in another contractor that would quite possibly be working through their own Ltd. company i.e. your company would be sub-contracting to another company

e.g. jamesbrown ltd has the contract but needs to have a 3 month break and looks for a substitute

gemma ltd is a perfect fit and available so jamesbrown ltd provides gemma ltd with a 3 month contract to deliver work whilst jamesbrown has a break

You have substituted yourself whilst also sub-contracting.....what is the difference?

[jamesbrown]

The above highlights the confusion. Unless you are going to get someone PAYE onto your company books, the only other way I can think of is getting in another contractor that would quite possibly be working through their own Ltd. company i.e. your company would be sub-contracting to another company

e.g. jamesbrown ltd has the contract but needs to have a 3 month break and looks for a substitute

gemma ltd is a perfect fit and available so jamesbrown ltd provides gemma ltd with a 3 month contract to deliver work whilst jamesbrown has a break

You have substituted yourself whilst also sub-contracting.....what is the difference?

There's only so many ways to express this, I guess..... The important point with substitution is that YourCo is sending someone to do the work that you would otherwise have done and then invoicing as normal for that work. If the client is arranging any of this or the payment is not going via YourCo, it is not a substitution, it is a change of supplier. If the contract allows for substitution, there's no problem for you to acquire someone to work in this role in whatever way you deem fit (assuming it is not unreasonably fettered), but it remains critically important that YourCo is still the supplier (and YourCo's relationship with the other supplier is incidental). To the client, the substitute is simply acting on behalf of YourCo as the supplier. Subcontracting and assignment are more general concepts that allow for services to be carried our by another supplier. Perhaps try to view this the other way around. If you can understand that subcontracting may take place without substitution (e.g. because it's a separate piece of work, invoiced by another supplier), it follows that the contract may be limited to substitution.

[dagenheis]

That one question alone will not put you inside IR35 and is a defendable point as they have agreed in the question about rectifying your work at your own expense. If you hold Professional Indemnity insurance as well, this will demonstrate that you take financial risk as a company.

Hope this helps

Gemma, it's interesting that you mention PI as I asked the same question whether there was a requirement for minimum PI as I already had a cover in place. The answer is that there is no mandatory requirement as I am not mission critical systems. The similar response was given by the agency. However, I do understand that PI indicates the ability to handle financial risks.

The client also mentioned that there hasn't been an instance in the past when they had to ask a contractor to fix the defective work at own expense as it will be the extreme situation where they will prefer to cancel the contact if the contract does not possess the appropriate skills.

I suppose there aren't any red flags on rest of the responses I mentioned above?

Fingers crossed, I hope HR will not come into the picture to get this signed by the client contact :-)

Cheers.