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Substitution and IR35

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    Substitution and IR35

    Hello,

    I intend to subcontract a piece of work due to the volume of work I have for a client. I assume this meets the substitute clause for IR35 I have in my contract with the client. Client is actually OK with me arranging for someone else to do this piece of work.

    My question - I will need a contract with the substitute. Can anyone point me in the right direction to find one I can use/adapt?

    Secondly, re supervision and control - I'll be paying the substitute, I'd like updates on progress to ensure timescale and forecast is achievable so I think its appropriate to ask for that? I also assume I include in the contract that the substitute must give client regular progress reports? Otherwise the substitute would have to give me reports and I'd have to update the client which seems long winded and a bit 'supervisory' for the substitute which I'd like to avoid for both our benefits.

    Any advice from you knowledgeable people?

    Thanks in advance!

    #2
    Originally posted by AdeleLaptop View Post
    Hello,

    I intend to subcontract a piece of work due to the volume of work I have for a client. I assume this meets the substitute clause for IR35 I have in my contract with the client. Client is actually OK with me arranging for someone else to do this piece of work.

    My question - I will need a contract with the substitute. Can anyone point me in the right direction to find one I can use/adapt?

    Secondly, re supervision and control - I'll be paying the substitute, I'd like updates on progress to ensure timescale and forecast is achievable so I think its appropriate to ask for that? I also assume I include in the contract that the substitute must give client regular progress reports? Otherwise the substitute would have to give me reports and I'd have to update the client which seems long winded and a bit 'supervisory' for the substitute which I'd like to avoid for both our benefits.

    Any advice from you knowledgeable people?

    Thanks in advance!
    Subcontracting and substitution are two different things, both positive for IR35, but the latter is more positive. A substitution involves another person completing the tasks that you otherwise would've completed yourself and being paid via YourCo (not directly by the client) under the terms of your existing contracting with them. They could be an employee of YourCo, for example. Thus, you are still handling the contract with your client and all reporting and payments should go through YourCo. If the work is done onsite, they would need to get the relevant security clearances and they would sit in your place at the client and do all of the things that you ordinarily would do, on behalf of YourCo. Regarding the contractual arrangements, I'm pretty sure you want a written agreement, yes . How you remunerate the sub is up to you, but you will need to pay them less than you receive from the client, unless you want to lose money.

    Subcontracting is a much more general concept that substitution.

    Comment


      #3
      Originally posted by AdeleLaptop View Post
      Hello,

      I intend to subcontract a piece of work due to the volume of work I have for a client. I assume this meets the substitute clause for IR35 I have in my contract with the client. Client is actually OK with me arranging for someone else to do this piece of work.
      !
      And why would you think that?
      'CUK forum personality of 2011 - Winner - Yes really!!!!

      Comment


        #4
        Originally posted by northernladuk View Post
        And why would you think that?
        Clearly out of naivete!

        I now realise from the first response there is a difference in the two terms and will proceed on the basis of substitution

        Comment


          #5
          Originally posted by jamesbrown View Post
          Subcontracting and substitution are two different things, both positive for IR35, but the latter is more positive. A substitution involves another person completing the tasks that you otherwise would've completed yourself and being paid via YourCo (not directly by the client) under the terms of your existing contracting with them. They could be an employee of YourCo, for example. Thus, you are still handling the contract with your client and all reporting and payments should go through YourCo. If the work is done onsite, they would need to get the relevant security clearances and they would sit in your place at the client and do all of the things that you ordinarily would do, on behalf of YourCo. Regarding the contractual arrangements, I'm pretty sure you want a written agreement, yes . How you remunerate the sub is up to you, but you will need to pay them less than you receive from the client, unless you want to lose money.

          Subcontracting is a much more general concept that substitution.
          Thank you , really useful info!

          Comment


            #6
            Originally posted by AdeleLaptop View Post
            Clearly out of naivete!

            I now realise from the first response there is a difference in the two terms and will proceed on the basis of substitution
            Your initial post reads a bit that you've too much to do so you are bringing someone else in so looks like subcontract but I guess you have multiple clients and the you need to release one position to the substitute so you can do other work for another client or something?
            'CUK forum personality of 2011 - Winner - Yes really!!!!

            Comment


              #7
              Originally posted by northernladuk View Post
              Your initial post reads a bit that you've too much to do so you are bringing someone else in so looks like subcontract but I guess you have multiple clients and the you need to release one position to the substitute so you can do other work for another client or something?
              I currently only have the one client. I have had multiple clients previously.

              The current client has asked me to do a specific time limited additional project that I don’t have capacity to do. Hence why I’ve used the words subcontract and substitute interchangeably (incorrectly). Client doesn’t want to find someone else, prefers to trust me to get it done ‘somehow’ even if I ‘send’ someone else.

              I’m now back to thinking this is subcontracting.

              Comment


                #8
                A quick dictionary check if each word would be a good start..
                'CUK forum personality of 2011 - Winner - Yes really!!!!

                Comment


                  #9
                  Originally posted by AdeleLaptop View Post
                  I currently only have the one client. I have had multiple clients previously.

                  The current client has asked me to do a specific time limited additional project that I don’t have capacity to do. Hence why I’ve used the words subcontract and substitute interchangeably (incorrectly). Client doesn’t want to find someone else, prefers to trust me to get it done ‘somehow’ even if I ‘send’ someone else.

                  I’m now back to thinking this is subcontracting.
                  Couple of thoughts here. For a start, you aren't sending someone else, you are sending an additional resource. You can't do it so it's not someone else. Maybe that's where you are tripping yourself up.

                  So now we have nearly finished defining the meaning of the two words.. Of course you need a contract with your sub. They work for you. Would you work at your client with no contract? Clue is in the name of what we are. You'll also need something from the client to agree the extra costs and scope of the work.
                  How you work with your sub is up to you but you represent them to the client and you are responsible ultimately but up to you how diligent you are.

                  Have you thought how you are going to do all this? Have you got the time and the means to go try find a contractor and get all the legal documents and contracts together to get them on board? Are you going to be able to find one that can only work for the time you need? If it's only a couple of weeks it's a lot of work for little back. If it is a short gig I'm not surprised the client can't be bothered resourcing it and happy to palm it to you. Could be a right pain. Unless there is a pretty good financial outcome for you here it could be a lot more effort than it is worth. Have you run the numbers to see what you'll be getting out of it?

                  Another thing. Client giving you extra work above and beyond the Statement of Work you are already contracted to do (You do have one of those don't you) sounds very much like Direction and Control to me. You need to be careful your working practices are IR35 safe. This does give you an opportunity for some good IR35 defense as you are working like a business but if could uncover other situations where you are just being given work like a permie. In this instance you can subcontract, great, but are there other instances where you've just accepted other work? Just be wary.
                  'CUK forum personality of 2011 - Winner - Yes really!!!!

                  Comment


                    #10
                    First, I would forget about IR35. That is the tail wagging the dog.

                    Second, I would look at your contract with the client. It may have separate clauses on subcontracting and substitution. It may be silent about one or both. Then there's the reality of whether the client will stick to the contractual terms or has room to interpret them differently. For example, with a Right of Substitution, that right could be fettered in some way that makes it difficulty to achieve in practice (e.g. "client reserves the right to reject a sub because they smell").

                    Third, work out what sort of relationship you want between the three parties. Subcontracting is more flexible and, in that case, the client may have no idea that it is even happening (again, the contract will probably regulate what happens, such as "no assigning or subcontracting without prior approval"). If you both want a bum-on-seat representative of YourCo working on the client site, then that is substitution (assuming they are doing work that you would otherwise do).

                    As I say, forget about IR35. Your question is a question about what makes sense from a business POV.

                    Just make sure that you stick to the contract with your client and that you don't lose money (and/or face).

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