Self-determining IR35 status post April by subcontracting from a "Small" consultancy?

[lifexplorer]

So just to give everyone here a bit of an update, spoke in more detail to the consultancy on this, so more understanding of the model on this:

- Before April, they're suggesting bringing me on standard an outside IR35 contract, timesheets and all.

- Post April, they're hoping/expecting Big Bank to move to a more SoW approach - I'd work on site as I feel is needed, would be facing off into a key Big Bank manager routinely, however I'd be getting paid on completion of deliveries in a SoW (completed task x, get paid y, etc..). Also there'd be a small company manager, along with the Big Bank to work through timescales for delivery, reviewing achievements in line with pre-agreement timescales, etc.

Here's the kicker though.. they're hoping the Big Bank agrees to the SoW approach (and some of the more immediate people involved in the project are bought into it), but they're not sure how long it will take for the Bank (and, in their thinking, even the broader market), to move to this approach. Bit of uncertainty here.

- However, they're so confident that the Big Bank will move to this approach eventually, even if they haven't moved to that approach in April, they'd hire me as a permanent employee for 6 months (acdtual perm with the small company, not umbrella), paying me a salary equivalent to my day rate on an annualised basis, less statutory holiday/benefit entitlement, though not employer NI... and then move me off that perm structure if/when the client agrees to the SoW approach.

When I first heard that, I figured it didn't sound too bad actually... doing the proposed job as an actual perm employed by the bank would probably pay about half of my day rate annualised, and the client site isn't that expensive/difficult to get to as needed.

However, it now occurs to me that working on an outside basis for the small consultancy, then becoming a perm employee of the consultancy would put me at risk of an investigation for HMRC... maybe only for 4-6 weeks of outside IR35 earnings, but not sure I'd want to attract the spotlight.

Anyway, thought I'd share and get people's thoughts on this... may be a model some of you might be approached about as well. Evidently this consultancy is working with two of the big banks of adopting this model.

We'll see..

[GhostofTarbera]

Having worked in big banks projects for 15years you are dreaming SOW take 6months minimum (with everyone pushing) to get agreed - 9/12 months minimum

Why would big bank bother when it can get an inside person right away or outsource person ??


Sent from my iPhone using Contractor UK Forum

[DrStrange]

If it’s a supply of labour, then the (large) client is responsible for the status determination statement (SDS) and liable if they fail to provide one. The small company is the fee payer in that situation, not the client, and they assume the liability of the fee payer (liable in general, but not where the client fails to supply an SDS).

If it's supply of services though then the Big Bank isn't the client, the small company is. And the small company is exempt from the SDS so can sub contract out some services, leaving the OP to work out his own status and carry the risks accordingly.

[ShandyDrinker]

Having worked in big banks projects for 15years you are dreaming SOW take 6months minimum (with everyone pushing) to get agreed - 9/12 months minimum

Why would big bank bother when it can get an inside person right away or outsource person ??

Sadly it is very much this.

Contractors need to think about this long and hard, myself included.

Of course we all want SOW style contracts and to ensure we maintain an outside IR35 status but for many larger (and indeed smaller) clients what will work against many contractors is that clients just aren't that organised.

Without fail, the vast majority of clients I've worked with from small software houses to large investment banks, they are all pretty disorganised and reactionary hence the need for contractors. To create decent SOWs will require planning.

Many clients will now probably be asking themselves whether the extra cost savings involved in true outside IR35 B2B contracts will be lost due to having to get themselves organised at which point what GhostofTarbera says rings true.

[krytonsheep]

clients just aren't that organised.
.

For banks / finance, there's also all the rules / compliancy / customer data, which brings quite a lot of risk in terms of handing work over to an outside consultancy. Moving to a SOW with a consultancy from having permie-tractors under their control is a big jump, that's not to say it won't happen for self contained, low risk projects.

[jamesbrown]

If it's supply of services though then the Big Bank isn't the client, the small company is. And the small company is exempt from the SDS so can sub contract out some services, leaving the OP to work out his own status and carry the risks accordingly.

Yes, if it’s a contracted out service, the small company is the client and it’s BAU for the OP. However, based on more recent posts, it sounds like the small company is looking for an effective permie anyway.

[Paralytic]

Sadly it is very much this.

Contractors need to think about this long and hard, myself included.

Of course we all want SOW style contracts and to ensure we maintain an outside IR35 status but for many larger (and indeed smaller) clients what will work against many contractors is that clients just aren't that organised.

Without fail, the vast majority of clients I've worked with from small software houses to large investment banks, they are all pretty disorganised and reactionary hence the need for contractors. To create decent SOWs will require planning.

Many clients will now probably be asking themselves whether the extra cost savings involved in true outside IR35 B2B contracts will be lost due to having to get themselves organised at which point what GhostofTarbera says rings true.

I really don't think it's because the clients are disorganised. It because they want flexible workforce that they can manage in the same way they would manage employees, but without the additional legal and financial responsibilities employment brings.

[ShandyDrinker]

I really don't think it's because the clients are disorganised. It because they want flexible workforce that they can manage in the same way they would manage employees, but without the additional legal and financial responsibilities employment brings.

I do agree with you about the additional responsibilities but don't about them being disorganised. Ever since I've worked in software development (20+ years), whether permanent employee or contractor, the vast majority have been disorganised.

Admittedly that may say more about my choice of places to work than anything else!

Seriously though, it really doesn't matter whether it's a large American Investment Bank, a small local software house, (inter)national telecoms company, insurer, public sector organisation, they've all been chaotic to a certain extent.

Much as any of us like it or not, this is happening and it really is a case of adapt or die.

[wattaj]

Much as any of us like it or not, this is happening and it really is a case of adapt or die.

^^ This.

[DrStrange]

Yes, if it’s a contracted out service, the small company is the client and it’s BAU for the OP. However, based on more recent posts, it sounds like the small company is looking for an effective permie anyway.

Is "contracted out service" defined anywhere?

What if the client has a few perm staff doing similar roles (albeit in a different way). Can that still be called a contracted out service?