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How near do you think this is to falling within IR35?

How near do you think this is to falling within...

I’d be interested in views as to how near (or far) the following might be from falling within IR35. By all means ask for further clarification if required.

- Do consultancy tasks (through a “service company”) for one client for several years providing skill and expertise that the client does not have.

- Not precluded from doing work for others (but have not done so in recent years).

- Company has been trading for over 20 years.

- No written contract.

- Tasks vary from as little as half-hour to several days often spread out over a few weeks. Note that it is not known at the outset that a particular task may take more than a day or so – it depends on the feedback from the client’s customers / potential customers.

- Overall, on a monthly basis, time spent can vary from a few hours to a number of days (rarely more than 4 or 5 days in a month, although on one occasion it went as high as 13 days).

- Work from home on own (no control or supervision) using own equipment.

- No ongoing mutuality of obligation, although it could be argued that once a task is started, it is anticipated that it will be seen through (e.g. similar to if one engaged a lawyer to deals with contracts for a customer – one would expect that he would see it through). But at no time is there an obligation to take on new tasks or for the client to provide new tasks.

- Within the demands of the tasks (e.g. timely replies), work is carried out whenever it suits.

- Theoretically, could be liable for consequences of poor / faulty work, both in terms of redoing at no additional fee or even for loss of profits etc. of the client. It might ever come to this in practice, but the potential is there.

- No benefits in kind – just fees billed quarterly at a daily rate.

- Substitution is not excluded, but then neither is it included (as said before, no written contract and it has never come up).

Many thanks
Steve Giles

Steve Giles


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03rd Nov 2008 13:24

As long as your client views the relationship the way you do, from what you said you have little to worry about. I would always recommend getting a written contract in place though. If nothing else it would give you the opportunity to check what your client's views are. Better now than when HMRC come knocking.

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By ebatch
27th Oct 2008 12:25

Point well taken
Steve Holloway - your point is well taken and thanks for explaining the thinking behind it.

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27th Oct 2008 12:08

Clarification ....
As you correctly say, based on the information GIVEN I would agree that it looks to be outside IR35. Let us be realistic, however, if given this information the first question HMRC would ask is ' well what does this person do the rest of their time?' The reason they (and I) ask this question is to ensure that the contractor is not working for their client on a permanent basis but disguising this by billing a higher rate of pay for apprantly ad-hoc periods.

I am obviously not suggesting for a minute that you are doing this but at least you will be prepared for the question should your situation be reviewed in the future. As an earlier poster said, it is an unusual situation and HMRC are interested in the unusual!

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By Anonymous
27th Oct 2008 11:28

I too am puzzled by the apparent need to know the subject's income needs: they are irrelevant.

I can't see any argument that this is disguised employment holding water for a moment, based on what we are told. Its outside.

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By ebatch
27th Oct 2008 11:16

- No agency involved.

- Why should one's income needs be relevant to whether something falls within IR35?

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27th Oct 2008 10:43

There appears to be no mutuality ...
and therefore a low risk of IR 35 applying but I too am interested in the ad-hoc pattern and how this fits your overall income needs.

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27th Oct 2008 10:14

No Contract = Working Practice matters
With no written contract in place it is the working practices that evidence the terms of the contractual arrangments.

Presumably you are working direct for the client rather than through an agency - no "upper" contract to worry about.

What do you do outside this work - I wish I could work for between a few hours to a week each month & not take any outside work.

Working "casually" does not preclude the arrangements being ones that would be employment if it were not for your intermediary company, ie IR35 can apply.

It seems likely, (especially after the judge's comments in Dragonfly), that you could argue there was any substitution term in your arrangements.

What, I think, should give you confort is that there is no mutuality, (even within each task there is no time commitment, just a task completion commitment). Is it REALLY true that you are asked to deal with specific tasks, rather than work when asked to? I suggest that you keep documentation, (e-mail exchanges?), of the task requests to show this.

I would say the IR35 exposure is minimal - you sound like an external contractor to me.

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By markfd
27th Oct 2008 10:08

Client's attitude to substitution
I don't profess to be an expert on this, but from reading Dragonfly, I suggest you consider whether your client's attitude is:

(1) We only want Steve to do this work, or

(2) We don't care who does the actual work providing Steve signs it off.

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