The Inland Revenue have provided information on the IR35 legislation on their web site for sometime now. One would think that the revenue would have to provide a complete unbiased view of their legislation, but as independant experts now agree they are completely biased towards the Inland Revenue. The IR have done a pretty good sales job in convincing a large number of contractors to hand over their money due to IR35.
However, most contractors must remember that the majority of contracts will pass IR35.
It is our belief that the Inland Revenue has purposely published biased guidlines in order to deter contractors from actually attempting to get their contracts and working practices sorted out to reflect their status. The Inland Revenue will then pounce on those contractors who have the old style 'standard agency contracts' that point strongly to employment.
Links to the guidelines are on the Inland Revenue site
The Right of Substitution
The IR says.....
"44. My contract specifies that I am allowed to hire a substitute. Will the Inland Revenue take this at face value?
If not will I need to provide evidence to prove that this right is genuine?
The Inland Revenue will want to ensure that the right to send a substitute is a genuine right before it can be taken into account in deciding employment status.
A right of substitution is only likely to exist where the client does not mind, from one day to the next for the duration of the contract, who carries out the work, provided that whoever does so is suitably qualified and experienced. We do not accept that such a right exists where the client's permission has to be obtained before sending a substitute.
Where the service company's contract is not with the client but with an agency, and there is a claimed right of substitution, the Inland Revenue would normally require a copy of the written contract between the agency and the client.
If you are unable to get access to that contract then you should ask the agency to send a copy to the Inland Revenue direct. If this is not possible you may be asked to provide alternative evidence. This could take the form of a letter from the client which confirms that it has agreed to your service company providing a substitute and that it does not matter which worker is provided on a day to day basis over the course of the contract."
IR35Calc says....
"...from one day to the next..." - There is nothing in case law that says that the substitution should be able to happen day to day. This is a complete misunderstanding of the way the knowledge based industry operates.
"...We do not accept that such a right exists where the client's permission has to be obtained before sending a substitute...." - Again, there is nothing in case law that says that the substitution should NOT have the permission of the client. The fact that both parties have to agree that the substitute is capable of doing the work does in no way point to employment. Remember that this is a knowledge based industry, we are not replacing one brick layer with another brick layer.
"...Where the service company's contract is not with the client but with an agency, and there is a claimed right of substitution, the Inland Revenue would normally require a copy of the written contract between the agency and the client." - The contract between the client and the agency has nothing to do with your company and cannot be used as evidence/ammunition since you were not party to the contract between them. i.e. you have no say in it.
Reviewing contracts
IR says....
"30. In deciding whether I would have been an employee of my client, will you only look at the contract I have signed, or the contract between the client and an agency?
The Inland Revenue will take account of all relevant contracts in order to discover whether the relationship between a worker and a client would have been one of employment, if there had been no intermediary. This would include any contracts between the client and an agency, and between the agency and the worker's service company. "
IR35Calc says...
As argued above, unless the contractor was party to the contract (had a say in it) then it cannot be used as evidence over your IR35 status. It is irrelevant. The IR will have a tough time trying to use this in court.
Claiming benefit
IR Says...
"39. If I work through my own service company on relevant engagements will I be entitled to unemployment benefit?
People who work through their own service companies are unable to claim benefits between contracts if they are still employees of their own service companies.
Individuals who are no longer employed by their service company may claim benefits on the same basis as any other employee."
IR35Calc says...
There appears to be a division on this. Some people have succesfully claimed benefit, and others have not. This is an area which is still a dark area. It is disgusting that the IR are not prepared to pay benefit when out of work, yet expect the worker to pay full NI on gross. Note that sacking yourself will not work since it will be considered that you forced yourself into unemployment. Contractors are truely stuck here. I'd expect some court cases on this, since it does seem wholly unfair, and we all know how fair Dawn would like to be with this legislation.