Is it likely that IR35 will apply to my client

Is it likely that IR35 will apply to my client

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I do not have any practical experience in IR35 cases but think that I may have a client where having read various cases, I think this could be an issue.

My Client A, was up to 12 months ago employed by N plc

N plc have now asked A to do some more work for them, but this must be done through a limited company, so A has set up his own company, A Ltd

An agency is also involved so that the agency invoices N plc based on timesheets produced by A. N plc then pays the agency and the agency in turn makes payments to A Ltd.

A Ltd is charging N plc £475 per day for his consultancy work. A Ltd’s only work is for N plc.

As I understand it this is a very common set up.

I have also run through some of the key Employed vs Self Employed tests and have established:

A works at N plc’s head office. He would appear to be totally integrated into the workforce. He has to undertake the work himself and would not be able to provide a substitute, but could advise N Plc on who internally may be able to replace him.

Although A has agreed to work set hours/days , N plc does not have the right to tell him when or how he should carry out his work – there is no control.

There would appear to be no financial risk. A Ltd could not make a loss and would not have to correct unsatisfactory work in its own time. It seems that A Ltd is not in a position to hire further help.

Based on all of the information I have obtained and what I have read, I think it is highly likely that other than for the existence of A Ltd, be treated as an employee of N Plc, so IR 35 probably would apply.

Does anyone have any views on this?

Any help gratefully received.

SP

Replies (3)

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By User deleted
03rd Apr 2008 09:17

Thanks to all of you for your help. It does look like we are probably stuck with IR35, but before we finally commit, I will ask my client to take specialist advice.

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By NeilW
02nd Apr 2008 20:11

Don't give up
I would take specialist advice in a case like this (and it would have been better if they had done so before signing up to the contract).

In IR35 cases it is becoming clear that the attitude of the client to the individual is of paramount importance. Are they interested in Fred to work on some consultancy, or are they interested in the consultant Fred and what he can do for them.

The key issue in your case is the issue of mutuality of obligation - the one HMRC like to try and avoid asking. Can N tell A not to bother coming in today and *not* have to pay them. Could A sue them for the lost day. If not, then they cannot be an employee because there is no requirement for N to provide work to A regardless of whether they have it or not. (subject to certain other complexities that stop A just being a day casual or a laid off redundant worker).

I always think that the easiest way to deal with IR35 is just to remove the requirement to provide work from the contract.

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By AnonymousUser
02nd Apr 2008 15:59

Agree
... looks like IR35. The day rate is reasonable and if your client possesses rare/unique skills not available to his client in the employment market then there might be a [***] of light. I would say you have got to have (and use) right to substitute in a case like this to have any chance. Timesheets are a killer if the work is regular.

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