Documenting outside IR35 status in a watertight way Documenting outside IR35 status in a watertight way
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  1. #1

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    Default Documenting outside IR35 status in a watertight way

    Hi,

    I recently had "the IR35 chat" with my current main client (I do freelance work for other clients but this one I work with on-site on a 5 days a week basis). They are fairly small and don't usually work with a large number of contractors, but are big enough to meet the medium-or-large size company test. I spent some time explaining to them exactly what is changing and why it's important for both of us to understand this and be happy with whatever decision is made.

    My contract has already been reviewed twice by two different companies for compliance and passed (with some changes to the initial contract that the client was happy to make, but no changes required the second time), and I make efforts with my working practices to be outside IR35. I've never had the need to supply a substitute, but when I spoke to the client about it they said that in theory they'd be happy with this - although my work is quite specialised (software development using a fairly unique stack of technologies) so it would be quite hard for me to find a suitable substitute to put this into practice (if it were simpler, I would definitely ask if I could send a substitute for a few days just to "tick this box").

    After discussing the upcoming changes, the client agreed that they are happy that the terms of our engagement are outside IR35, and they are happy to provide me with whatever documentation is required (and for me to undertake whatever steps are necessary with regard to working practices to ensure this is really the case), so if I'm able to get this documented in as watertight way as possible, I'm happy to continue working with them.

    The difficulty I'm having is working out exactly what documentation is required! As with many of these IR35 things, it seems a bit fuzzy....

    It sounds like the key "legal" document is the Status Determination Statement, an example of which I've found at https://www.qdoscontractor.com/docs/...t-template.pdf. Are there any other examples of these out there? I'd expected it to be an official HMRC form to complete, but looks like it is more "ad-hoc".

    If I were to present the example from that template, modified to meet any specifics of my situation, to my client for them to base their assessment on (i.e. for them to read, confirm they are happy with and sign), would that be sufficient? Or do I need to ensure they go via a third party to create a bespoke assessment for it to be watertight, in which case can anyone recommend someone able to provide this service for a reasonable fee? Or would the HMRC CEST tool suffice? Or do I need to wait until nearer the April 2020 date before asking them to provide this? As with much IR35 related stuff, it's hard to tell what is actually required, and what is just companies online trying to make a fast buck out of people's fears!

    One other piece of documentation that is referenced a lot and my client would also be happy to sign is a confirmation of arrangements letter - is this still worth having? Again, I was going to base this on the QDos template at Confirmation of Arrangements - IR35 Resources - Qdos Contractor - there's also one IPSE provide at https://www.ipse.co.uk/uploads/asset...fae75f7d27.pdf but I found the QDos one clearer and seemed to cover more.

    Any other recommendations on how I can solidify my outside status, either in terms of documentation or working practices, given that the client is on board and happy to do what is required, would be much appreciated.

    Thanks!

  2. #2

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    Get a contract that treats you as a supplier, preferably between YourCo and their Procurement team, and asks you to deliver specific pieces of work for a fixed fee per item, preferably between on a Purchase Order call-off. Add that to the SD and the CoA documents and you should be there.

    The biggest risk in a case is getting stuffed by your client, who often have no idea what they are talking about when it comes to describing the relationship. You seem to be ahead of that particular risk...
    Blog? What blog...?

  3. #3

    Should post faster

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    Quote Originally Posted by malvolio View Post
    Get a contract that treats you as a supplier, preferably between YourCo and their Procurement team, and asks you to deliver specific pieces of work for a fixed fee per item, preferably between on a Purchase Order..
    The standard flow I've done in the past is

    • Discuss with the client what they want
    • You provide the client with a quote / payment terms
    • Client adds your company as a supplier to their system
    • Client raises a purchase order and sends it to you
    • You then invoice them for the work


    If the quote is for a fixed price then you are bearing a financial risk if the work overruns, which is another sign you're not employed.

  4. #4

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    Did you explain that currently the tax risk is with you but post April that falls to them?

  5. #5

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    Quote Originally Posted by crt View Post
    Hi,

    I recently had "the IR35 chat" with my current main client (I do freelance work for other clients but this one I work with on-site on a 5 days a week basis). They are fairly small and don't usually work with a large number of contractors, but are big enough to meet the medium-or-large size company test. I spent some time explaining to them exactly what is changing and why it's important for both of us to understand this and be happy with whatever decision is made.

    My contract has already been reviewed twice by two different companies for compliance and passed (with some changes to the initial contract that the client was happy to make, but no changes required the second time), and I make efforts with my working practices to be outside IR35. I've never had the need to supply a substitute, but when I spoke to the client about it they said that in theory they'd be happy with this - although my work is quite specialised (software development using a fairly unique stack of technologies) so it would be quite hard for me to find a suitable substitute to put this into practice (if it were simpler, I would definitely ask if I could send a substitute for a few days just to "tick this box").

    After discussing the upcoming changes, the client agreed that they are happy that the terms of our engagement are outside IR35, and they are happy to provide me with whatever documentation is required (and for me to undertake whatever steps are necessary with regard to working practices to ensure this is really the case), so if I'm able to get this documented in as watertight way as possible, I'm happy to continue working with them.

    The difficulty I'm having is working out exactly what documentation is required! As with many of these IR35 things, it seems a bit fuzzy....

    It sounds like the key "legal" document is the Status Determination Statement, an example of which I've found at https://www.qdoscontractor.com/docs/...t-template.pdf. Are there any other examples of these out there? I'd expected it to be an official HMRC form to complete, but looks like it is more "ad-hoc".

    If I were to present the example from that template, modified to meet any specifics of my situation, to my client for them to base their assessment on (i.e. for them to read, confirm they are happy with and sign), would that be sufficient? Or do I need to ensure they go via a third party to create a bespoke assessment for it to be watertight, in which case can anyone recommend someone able to provide this service for a reasonable fee? Or would the HMRC CEST tool suffice? Or do I need to wait until nearer the April 2020 date before asking them to provide this? As with much IR35 related stuff, it's hard to tell what is actually required, and what is just companies online trying to make a fast buck out of people's fears!

    One other piece of documentation that is referenced a lot and my client would also be happy to sign is a confirmation of arrangements letter - is this still worth having? Again, I was going to base this on the QDos template at Confirmation of Arrangements - IR35 Resources - Qdos Contractor - there's also one IPSE provide at https://www.ipse.co.uk/uploads/asset...fae75f7d27.pdf but I found the QDos one clearer and seemed to cover more.

    Any other recommendations on how I can solidify my outside status, either in terms of documentation or working practices, given that the client is on board and happy to do what is required, would be much appreciated.

    Thanks!
    I used to get a Confirmation of Arrangements letter signed for my earliest contracts, as advised by QDOS. For my first contract, the client manager was happy to do it as her husband was a contractor and she had a high level understanding of IR35. In recent times, clients have been more reluctant to sign them or they try to get HR involved. At one client, the agent specifically instructs the client to refuse to sign any such letter.

  6. #6

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    Quote Originally Posted by malvolio View Post
    Get a contract that treats you as a supplier, preferably between YourCo and their Procurement team, and asks you to deliver specific pieces of work for a fixed fee per item, preferably between on a Purchase Order call-off. Add that to the SD and the CoA documents and you should be there.

    The biggest risk in a case is getting stuffed by your client, who often have no idea what they are talking about when it comes to describing the relationship. You seem to be ahead of that particular risk...
    Thanks, it does sound like fixed fee is the most secure route to go. I think what I'll do is renew until February with the current contract and a "real arrangements" letter, and in parallel speak to them about changing the contract to a fixed-fee basis. I'm sure there'd be no real issues and there'd be an underlying understanding that the pricing etc. would be roughly the same - my main concern would be nailing down the exact specification for what would be delivered as its one of those organisations where priorities for which feature comes next can change quite quickly, but I'm sure we could find a way to word it to account for this.

    I am guessing that something like "Development of new features for app xxx" is too vague to provide much security, and I'd want to document at a more granular level? If anyone has advice or examples of moving to such contracts, that would be great!

  7. #7

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    Quote Originally Posted by Manic View Post
    Did you explain that currently the tax risk is with you but post April that falls to them?
    I did - basically they want to know what they need to do to ensure they aren't at risk here, and also to supply whatever documentation I need to continue being able to work with them. As I say, they're flexible in terms of adapting working practices etc. to cover for this. I think because they only work with a small number of contractors this wasn't something that had come up on their radar yet.

  8. #8

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    Quote Originally Posted by edison View Post
    I used to get a Confirmation of Arrangements letter signed for my earliest contracts, as advised by QDOS. For my first contract, the client manager was happy to do it as her husband was a contractor and she had a high level understanding of IR35. In recent times, clients have been more reluctant to sign them or they try to get HR involved. At one client, the agent specifically instructs the client to refuse to sign any such letter.
    Sounds like there's no reason not to get one signed if they are happy to, so I'll certainly do that for the current arrangement.

  9. #9

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    There is no watertight way. It can all unravel if the client says something contrary to anything they have signed. Personally this why I see positives in what is coming post April. The current situation is fairly crazy.

  10. #10

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    There's always plausible deniability too if the person who agreed to any arrangements leaves and incoming management disagree.

    I had that work in my favour where I managed to convince a new manager that the one who left under a cloud said I didn't need to fill in certain tracking nonsense and could WFH two days a week

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