Convince Client NOT to use CEST

[IAmContractor]

I am in a contract working for a public sector client.

I have been contracting for 16 years and on this project for 4.

When the Public Sector Changes came about my client determined the contract was inside IR35. At the time, I put my rate up and accepted it; thinking it would only be short term anyway. However the project has had some changes and been extended several times. They have asked me to stay beyond the end of my current contract until the end of next year.

However, I need to get out of IR35.

My contract and my working practices are outside IR35. The contract stipulates a substitution clause; this is the basis that the client has determined me inside IR35, because they would expect to reject a substitute on the basis that I designed and implemented most of this project, and meaningful work at this point requires an intimate knowledge that a new substitute could not have. Fair enough.

But also my contract stipulates no MOO, and no Control, both of which are correct. Regarding control, I designed the architecture; I chose the frameworks, languages and dependencies that I work with. The client gives me a requirement and I produce it hoe I see fit. The only control they exert is that we agree, sometimes, when and where the work needs to be completed as some of the work needs direct access to network servers. Sometimes I work off site in my own office on my own equipment.

But CEST! Every time I have been through the tool, the substitution issue causes an inside verdict. To pass CEST without Substitution, the Control element needs to be absolute, which does not seem right. I agree with my client days which I am going to be in and out of the office. According to my accountant this is enough to satisfy the law, but CEST is biased.

How do you convince a client to ignore CEST? The problem clearly is that we are asking people with no tax knowledge to make a decision like this.

Any advice?

[mudskipper]

You could quote GDPR and the right to not be subject to automated decision making.

Ask them to make a manual decision and point them at QDOS or similar.

Edit to say - I don't know how far you'd get, but given GDPR is as scary as IR35, they might oblige

Rights related to automated decision making including profiling | ICO

[Patrick@Intouch]

This is a great example of why CEST is flawed.

It picks up on substitution as though that were the overriding factor in reaching a determination on IR35 status whereas in reality each of the three main factors (Personal Service, MOO and Control) and independent of one another. If there is a requirement for personal service and there is MOO but no control then it would be difficult to argue that you are an employee.

Also, the basis for rejection of substitution should be explore as should your ability to subcontract elements of your work.

I agree that your start point should be that blanket decisions don't work and that they have a duty to take reasonable care to arrive at their decision.

Your next challenge is to then agree on what reasonable care looks like. Is it using a tool that almost everyone agrees is flawed and gives different results depending on the user or is it taking advice and guidance from IR35 experts?

I know what my answer would be...

[DaveB]

You could quote GDPR and the right to not be subject to automated decision making.

Ask them to make a manual decision and point them at QDOS or similar.

Edit to say - I don't know how far you'd get, but given GDPR is as scary as IR35, they might oblige

Rights related to automated decision making including profiling | ICO

I'd agree with MS. You have a right to request human intervention where automated processing is used to make decisions about you.

You can also request copies of the information the client entered into the tool so that you can correct or challenge it.

I wrote up a fairly long piece on this a while back and there are a number of areas where I think MHRC could be challenged at a wider level over the use of the CEST.

[webberg]

As he said.

Nobody knows how CEST is weighted. HMRC refuse to disclose that.

You should therefore ask the public sector client for a detailed reason as to why the post is within IR35.

If you cannot overturn the decision made by CEST, ask the client to not use it.

There is no compulsory statute forcing them to use the tool. They can make their own assessment.

You mention substitution as being a key determinant. Whilst I appreciate that the project is yours, was built by you and is in your own image, nobody is irreplaceable. A substitute with sufficient experience and training is possible. It may not be probable, but that is not the test. The test relies upon your right to propose a suitable substitute. It matters not if the client considers said person suitable.

And don't forget, the substitute need not be a single person. It might be more appropriate for a service provider to be the substitute.

[WordIsBond]

But also my contract stipulates no MOO, and no Control, both of which are correct. Regarding control, I designed the architecture; I chose the frameworks, languages and dependencies that I work with. The client gives me a requirement and I produce it hoe I see fit. The only control they exert is that we agree, sometimes, when and where the work needs to be completed as some of the work needs direct access to network servers. Sometimes I work off site in my own office on my own equipment.

But CEST! Every time I have been through the tool, the substitution issue causes an inside verdict. To pass CEST without Substitution, the Control element needs to be absolute, which does not seem right. I agree with my client days which I am going to be in and out of the office. According to my accountant this is enough to satisfy the law, but CEST is biased.

How do you convince a client to ignore CEST? The problem clearly is that we are asking people with no tax knowledge to make a decision like this.

Don't convince them to ignore CEST. Convince them to answer the questions correctly.

For example: Can the end client decide the schedule of working hours?
The correct answer here is no. You decide your schedule. The only part of this that they have is working out access to their servers. But they don't decide which days you work or when on those days. In fact, if I understand correctly, you decide which days you want to work on their servers and coordinate with them to make sure you can have access those days.

The 'Partly' answer to that question is for when client and contractor sit down and plan out the contractor's schedule together. That's not what is happening. You are coordinating with them the schedule for their server, within your own pre-decided work schedule.

Their reason for saying no on substitution is not sound. They are saying they would reject a substitute because the substitute would not have all the necessary criteria. That doesn't invalidate the right of substitution. A substitute would have to be 'equally skilled, qualified, security-cleared, and able to perform the worker's duties.' That's right out of CEST.

They are saying they wouldn't accept a substitute because they don't believe there is anyone equally able to perform your duties. The question is NOT whether they think there is such a person. The question is, if there were such a person, if they would accept them. Nobody is expecting them to accept a substitute with lesser ability. It would be up to you to find someone that you could bring up to speed and who would then provide an equal service. If you really trained a replacement that was just as good as you, that was equally able to perform your duties, would they reject him? That's what the question is asking.

If they don't think such a person does or might exist, that's an interesting sidelight but is totally irrelevant to the question at hand. The question is, if such a person did exist and you offered him in your place, would they accept. That's the question they should be answering.

[IAmContractor]

Lots of great answers, and deffo something to think about.

The comment that their answer to the substitution clause is wrong is an interesting one. It is so correct. The problem here is clients don't understand, and my problem is the people making these decisions are unapproachable by me.

Final answer; I've told them my take on this. I've given them advice on each answer withing CEST that truly reflects the contract and the way we work, and while CEST is biased, an absolute lack of control without substitution still returns an outside result. Biased because in the plumber example, I think I gave, he couldn't choose where he works but is still not an employee.

Bottom line, I've given them an ultimatum; declare the contract out as it should be or I'm leaving the project in 4 days time. They will have no choice but to accept a "substitute" then.

I did find a document on the company servers that, by the person in HR who told me unequivocally that I am inside, that casually "employees" are entitled to holiday pay. In theory could I put in a claim for holiday pay? How would I need to do that? And if they didn't agree could I then take them to a tribunal with a view to prove I'm not an employee? I've seen loads of info on this but nothing conclusive.

Cheers

Sent from my SM-N950F using Contractor UK Forum mobile app

[DaveB]

Lots of great answers, and deffo something to think about.

The comment that their answer to the substitution clause is wrong is an interesting one. It is so correct. The problem here is clients don't understand, and my problem is the people making these decisions are unapproachable by me.

Final answer; I've told them my take on this. I've given them advice on each answer withing CEST that truly reflects the contract and the way we work, and while CEST is biased, an absolute lack of control without substitution still returns an outside result. Biased because in the plumber example, I think I gave, he couldn't choose where he works but is still not an employee.

Bottom line, I've given them an ultimatum; declare the contract out as it should be or I'm leaving the project in 4 days time. They will have no choice but to accept a "substitute" then.

I did find a document on the company servers that, by the person in HR who told me unequivocally that I am inside, that casually "employees" are entitled to holiday pay. In theory could I put in a claim for holiday pay? How would I need to do that? And if they didn't agree could I then take them to a tribunal with a view to prove I'm not an employee? I've seen loads of info on this but nothing conclusive.

Cheers

Sent from my SM-N950F using Contractor UK Forum mobile app

If you are an IPSE member get in touch with them. They have just settled a case very similar to this and are looking for others to take on.

[IAmContractor]

If you are an IPSE member get in touch with them. They have just settled a case very similar to this and are looking for others to take on.

I have been in the past but am not at present. However as I am getting out of IR35 one way or the other, I will be rejoining. Anyone have a discount code?

[pscont]

I am in a contract working for a public sector client.

I have been contracting for 16 years and on this project for 4.

When the Public Sector Changes came about my client determined the contract was inside IR35. At the time, I put my rate up and accepted it; thinking it would only be short term anyway. However the project has had some changes and been extended several times.

There was absolutely no point accepting being inside IR35 from the beginning. Should have screwed them long time ago.
Now it is more like the very infamous band 'past redemption' and their only album 'useless amputation'