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Contract Help - IR35

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    Contract Help - IR35

    Hi

    I have a gig through a Polish agency paying in EUROS for a US company the projects are EU. The agency doesn't want to include a substitution clause (they rightly don't get the whole IR35 thing and also don't care. I have added clauses re MOO and control but they don't like the substitution clause. They will keep it but only with a financial penalty to my company if I invoke it.

    So, do you think I am better having it with the financial clause or just removing it?

    QDOS have told me I am stuffed without a substitution clause - even though I have ran the CEST tool without a sub and it has advised me i am outside.

    Sick of this crap, but if anyone can help I would be grateful

    Cheers
    Martin

    #2
    IIRC the law says it's S, D or C. Not and.

    Substitution is one of those gold standard things that, in most experience, is never tested by the contractor and is only in some edge cases ever going to be accepted by the client. To say you're screwed by not having that in place is disingenuous. It makes a case more difficult (so I suspect Qdos won't cover you) but not impossible if everything else stacks up in your favour.

    I personally would keep the CEST output, acknowledge the risk highlighted by Qdos and take the gig without forcing the issue any further. You could accept the financial penalty the client wants to put into the contract and just hope you never have to enforce the clause.

    Comment


      #3
      So if I understand correctly, the agency doesn't want you to have substitution, but will accept it if there's a penalty.

      So why not just accept it with the penalty? That's actually a reasonable request by a client -- yeah, you can send someone else, but we have to security clear him / teach him our protocols / etc. So put it in the contract, then never use the right. You never have to pay the penalty, you never substitute, but the right is there, so you're iron-clad on substitution.

      In fact, that makes it look much less like a sham agreement. This is a substitution clause that obviously had some thought put into it.

      A contract paid in euros through a Polish agency for a US company is probably not likely to come under HMRC scrutiny anyway. But I don't see the problem with just putting the clause in the contract and never using it.

      Comment


        #4
        Originally posted by ladymuck View Post
        IIRC the law says it's S, D or C. Not and.

        Substitution is one of those gold standard things that, in most experience, is never tested by the contractor and is only in some edge cases ever going to be accepted by the client. To say you're screwed by not having that in place is disingenuous. It makes a case more difficult (so I suspect Qdos won't cover you) but not impossible if everything else stacks up in your favour.

        I personally would keep the CEST output, acknowledge the risk highlighted by Qdos and take the gig without forcing the issue any further. You could accept the financial penalty the client wants to put into the contract and just hope you never have to enforce the clause.
        Thanks, do you think having the Subs clause with penalty makes the case stronger or weaker?

        Comment


          #5
          Originally posted by WordIsBond View Post
          So if I understand correctly, the agency doesn't want you to have substitution, but will accept it if there's a penalty.

          So why not just accept it with the penalty? That's actually a reasonable request by a client -- yeah, you can send someone else, but we have to security clear him / teach him our protocols / etc. So put it in the contract, then never use the right. You never have to pay the penalty, you never substitute, but the right is there, so you're iron-clad on substitution.

          In fact, that makes it look much less like a sham agreement. This is a substitution clause that obviously had some thought put into it.

          A contract paid in euros through a Polish agency for a US company is probably not likely to come under HMRC scrutiny anyway. But I don't see the problem with just putting the clause in the contract and never using it.
          That is a good point.

          The risk is low. The agency aren't going to be sending HMRC details of the engagement as a UK based agency would have to, so HMRC won't know anything about it to want to have a look.

          Comment


            #6
            If the client doesn't want to accept substitute and the terms of the contract are shaped for the purpose of avoiding tax, then I doubt HMRC will accept something like that. Even if the client would accept a substitute, the substitute would have to perform all the tasks that you do, so that the substitute wouldn't be considered as helper. For example if you send someone to train the client how to use the built software, then that will not count as legitimate substitute. Another thing is that if during the period of the contract you take any time off and not send a substitute, that may invalidate the clause. There is also a question of practicality - would your substitute be able to get up to speed with the project quickly enough and get any security checks etc on time. The clause may be viewed as dead because it wouldn't be possible to reasonably invoke it. All the guidance with case studies is here: https://s3-eu-west-2.amazonaws.com/t...0-Apr-2021.pdf

            Comment


              #7
              Originally posted by elsergiovolador View Post
              If the client doesn't want to accept substitute and the terms of the contract are shaped for the purpose of avoiding tax, then I doubt HMRC will accept something like that. Even if the client would accept a substitute, the substitute would have to perform all the tasks that you do, so that the substitute wouldn't be considered as helper. For example if you send someone to train the client how to use the built software, then that will not count as legitimate substitute. Another thing is that if during the period of the contract you take any time off and not send a substitute, that may invalidate the clause. There is also a question of practicality - would your substitute be able to get up to speed with the project quickly enough and get any security checks etc on time. The clause may be viewed as dead because it wouldn't be possible to reasonably invoke it. All the guidance with case studies is here: https://s3-eu-west-2.amazonaws.com/t...0-Apr-2021.pdf
              Could you post more rubbish in a single paragraph.

              The substitute merely needs to do the work required at the current moment in time - which means that I can (and would) send in a BA at some points, a solution architect at others and a demonstrator / trainer at other points.

              As WordIsBond says the fact the substitution clause has a penalty clause attached to it shows that the impact of a poorly thought out substitution has been thought about.

              And who exactly are the Tax Centre ofExcellence - it looks like HMRC trying to pretend to be someone else (and it is near enough it's a Government Department telling other departments how not to annoy HMRC).
              merely at clientco for the entertainment

              Comment


                #8
                Originally posted by WordIsBond View Post
                So if I understand correctly, the agency doesn't want you to have substitution, but will accept it if there's a penalty.

                So why not just accept it with the penalty? That's actually a reasonable request by a client -- yeah, you can send someone else, but we have to security clear him / teach him our protocols / etc. So put it in the contract, then never use the right. You never have to pay the penalty, you never substitute, but the right is there, so you're iron-clad on substitution.

                In fact, that makes it look much less like a sham agreement. This is a substitution clause that obviously had some thought put into it.

                A contract paid in euros through a Polish agency for a US company is probably not likely to come under HMRC scrutiny anyway. But I don't see the problem with just putting the clause in the contract and never using it.
                Thanks, I thought perhaps having a financial restriction was worse than not having a subs clause but I get your point. QDOS seem to think it is as bad as not having a clean right to SUB.

                Comment


                  #9
                  Originally posted by eek View Post
                  Could you post more rubbish in a single paragraph..
                  He most certainly can and sadly you can gaurantee he will.
                  'CUK forum personality of 2011 - Winner - Yes really!!!!

                  Comment


                    #10
                    Now they have offered to change clause to days

                    They have come back and offered to change the clause to advance notice of 35 days - not sure if this is better or worse ?

                    Comment

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