Originally posted by rogerthedodger
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What a vast number of contractors do not seem to understand is that in an HMRC investigation, the tax inspector will be looking at what actually happens in practice, and this is much more important than what is in the written contract.
With regards to RoS, the fact of the matter is that you need to have an UNQUALIFIED RIGHT to substitute. This means you have to be able go to your client and say that you WILL be bringing in e.g. Fred Bloggs or Jane Smith to cover for you whilst you are on holiday or working with another client, NOT "is it OK if I bring in Fred Bloggs / Jane Smith". In other words, it's got to be TELL, NOT ASK!
In practice, only a very tiny percentage of one man band contractors would ever pass the substitution test (and quite possibly none at all), for the simple reason that they do not in practice have the unqualified right. This is irrespective of what the written contract says. In particular, any caveats in written contracts such as "request to substitute will not be unreasonably withheld" will automatically result in a fail, because such caveats immediately tell the tax inspector that permission had to be sought in the first place, and therefore there has been no unqualified right. Also, even if you have brought in a subby, that does not automatically mean you're bullet proof. If you've actually brought in a subby, but you've had to ask permission to do so, then it's a fail, because you haven't had the unqualified right. No client in his/her right mind, in practice, will allow a contractor to bring in a subby without prior approval, even if such approval is just a few simple questions
A tax inspector will talk to your clients, and will be trying to find out what happens in practice. Your clients will not want to be seen to be aiding and abetting tax evasion, and will therefore cover their backs by telling the tax inspector the truth, not telling the tax inspector what you want them to tell the tax inspector.
As a contractor, you are in practice engaged by a client because of your skills as an individual, not because Your Company Ltd is a renowned and reputable player in e.g. project managing xyz. That's why you send clients a CV rather than point them to the Your Company Ltd website.
HMRC have upped their game in recent years, and contractors who had passed IR35 years ago would in all probability not pass today.
With regards to RoS, the fact of the matter is that you need to have an UNQUALIFIED RIGHT to substitute. This means you have to be able go to your client and say that you WILL be bringing in e.g. Fred Bloggs or Jane Smith to cover for you whilst you are on holiday or working with another client, NOT "is it OK if I bring in Fred Bloggs / Jane Smith". In other words, it's got to be TELL, NOT ASK!
In practice, only a very tiny percentage of one man band contractors would ever pass the substitution test (and quite possibly none at all), for the simple reason that they do not in practice have the unqualified right. This is irrespective of what the written contract says. In particular, any caveats in written contracts such as "request to substitute will not be unreasonably withheld" will automatically result in a fail, because such caveats immediately tell the tax inspector that permission had to be sought in the first place, and therefore there has been no unqualified right. Also, even if you have brought in a subby, that does not automatically mean you're bullet proof. If you've actually brought in a subby, but you've had to ask permission to do so, then it's a fail, because you haven't had the unqualified right. No client in his/her right mind, in practice, will allow a contractor to bring in a subby without prior approval, even if such approval is just a few simple questions
A tax inspector will talk to your clients, and will be trying to find out what happens in practice. Your clients will not want to be seen to be aiding and abetting tax evasion, and will therefore cover their backs by telling the tax inspector the truth, not telling the tax inspector what you want them to tell the tax inspector.
As a contractor, you are in practice engaged by a client because of your skills as an individual, not because Your Company Ltd is a renowned and reputable player in e.g. project managing xyz. That's why you send clients a CV rather than point them to the Your Company Ltd website.
HMRC have upped their game in recent years, and contractors who had passed IR35 years ago would in all probability not pass today.
That's one pointer to IR35.
Don't forget about the whole supervision, direction and control aspect.
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