What are your clients doing with IR35 reform?

[genius]

The size test applies to the end client, not an agency for example

Who is the end client in my example?

[northernladuk]

The size test applies to the end client, not an agency for example

Who is the end client in my example?

Would it not be the fee payer? I.e the entity that would normally be making the determination if the weren't exempt because of their size.

[WordIsBond]

I don't want to make a new thread but how will subcontracting or agencies work in this. And I get it, this is stupid question I should know the answer too already but whatever...

A person has a contract with a small company. The small company provides teams of consultants to big companies. The person is one of these consultants. The person works with lots of these big companies, but always through the small company and only ever has contracts with the small company.

As the contracts are with a small company, it sounds like so far they will not fall under the new requirements to determine IR35 status. So no change? It is still responsibility of the person?

The size test applies to the end client, not an agency for example

Who is the end client in my example?

The big companies are obviously the end clients, in your scenario. The consultant (small) company is the fee payer in terms of the legislation but the end client is the big company, and they have to make the determination. In your scenario, the small company is effectively little different from an agency, as far as terms of the legislation are concerned. The agency is not the one tasked with making the determination.

And you are right, this is a real scenario. I use subcontractors, but it is my clients that, as large companies, will make the determination for them.

[genius]

I'm not sure the big company is the end client. The individual is providing a service (consultancy) to the small company and that is who the individual has a contract with, invoices, gets paid by. And I don't think it matters if that service is to assist bigger companies. The big company also only have a contract / financial relationship with the small company. They wouldn't know, or be interested in, which of the small company's consultants are inside/outside IR35, in fact they probably don't know know if they're contractors.

So for now I'm going to assume the decision remains with the individual. Until we hear more details.

[jamesbrown]

The size test applies to the end client, not an agency for example

Who is the end client in my example?

The end client is the legal person to whom your services are provided and for the benefit of. Based on your description, it would probably be the big company. For it to be the small company, you would need to be creating something for the small company that is being sold to larger companies, i.e., your day-to-day working would be for the small company, not onsite at the big company working with big company employees and big company contractors.

There will be some legitimate uncertainty in some cases which, again, is why this exemption won’t last. However, if you’re working for the big company, day-to-day, that will be the relevant legal person.

[genius]

Last thing to complicate this further. Say the big company is the one to make the call, but they're not a UK company. Are they still going to have to make the call on whether their UK contractors are in or outside of a UK regulation?

[jamesbrown]

I'm not sure the big company is the end client. The individual is providing a service (consultancy) to the small company and that is who the individual has a contract with, invoices, gets paid by. And I don't think it matters if that service is to assist bigger companies. The big company also only have a contract / financial relationship with the small company. They wouldn't know, or be interested in, which of the small company's consultants are inside/outside IR35, in fact they probably don't know know if they're contractors.

So for now I'm going to assume the decision remains with the individual. Until we hear more details.

It doesn't matter who your contract is with and who pays your fees. That is the "fee payer". That could be an agency or a consultancy or, in some cases, the end client. Most of what you say above also applies to a traditional supply chain with an agency (i.e., where you write consultancy, substitute agency). If you are being placed by the consultant at the big company, rather than producing something for the small consultant business, then the big company will be the end client.

Part of the problem here is that you are willing it to be something different, I think, rather than looking at the reality.

[jamesbrown]

Last thing to complicate this further. Say the big company is the one to make the call, but they're not a UK company. Are they still going to have to make the call on whether their UK contractors are in or outside of a UK regulation?

Yes. If the overseas company has a UK presence, the responsibility will lie with the UK company. However, if the overseas company has no UK presence, it will lie with the overseas company. The legislation states that the overseas company will be treated like a UK company. This is another area that I don't see working out well in practice.

[genius]

Yes. If the overseas company has a UK presence, the responsibility will lie with the UK company. However, if the overseas company has no UK presence, it will lie with the overseas company. The legislation states that the overseas company will be treated like a UK company. This is another area that I don't see working out well in practice.

Don't see it either. Let's hope they scrap the whole thing. Thanks for all your answers.

[jamesbrown]

Don't see it either. Let's hope they scrap the whole thing. Thanks for all your answers.

Agree. Along with the small business exemption, this is probably the thing most likely to fall apart or not work in practice (albeit on two completely different scales). Unless the contractor informs the overseas company, they will be unaware of their responsibility and liability. On the latter, I'm not sure how the liability will be defined; traditionally, an employer with no UK presence has no role as a UK employer (no employer NICs etc.) and the employee would set up their own PAYE Direct scheme or become Schedule D, but the draft legislation suggests that the overseas company will be treated like a UK employer.