Emily Coltman of FreeAgent provides advice to recent IR35 questions in Any Answers. In this blog, she responds to mimil's query on how to charge for consulting work done outside of day-to-day running business.
The query here is whether a business would be within IR35. The circumstances are set out as:
“I'm using my own equipment, managing my own time, working on discrete projects/pieces of work & mostly working from home. On the other hand, I am charging a day-rate, they wouldn't expect substitution & I will have to attend face-to-face meetings once or twice a week at the client's office. I will only be working for one client, but will be balancing this with running my own business.”
This is a classic mixture of factors pointing away from, and towards, the contract being within IR35.
Apart from the obvious factors, the balance between the contractor’s consulting work and their own business is also interesting. The “own business” is defined only as an “internet-based business” and we do not know how, if at all, this business coalesces with the contractor’s due diligence consulting. For example, the business may be to provide template due diligence checklists. That said, for IR35 each engagement is considered in isolation, so the impact of the other business on any decision as to whether the consulting work is within IR35 would be minimal.
The day rate, as opposed to a project rate, may or may not be pivotal given that in many industries it is the norm to charge a rate per day.
There are also further questions that would need to be asked.
Regarding substitution, the contractor says only that the client “wouldn’t expect substitution”. Whether substitution is expected or not, the key here is whether substitution would be permitted or whether personal service is required, and, if a substitute is sent, whose responsibility - the contractor’s or the client’s - it is to pay that person. In the case of Ready Mixed Concrete (South East) Ltd vs Minister of Pensions and National Insurance, which also had a variety of factors pointing in different directions, any substitute lorry driver had to be paid by the contractor.
The contractor has not mentioned the control factor, which is pivotal to many IR35 cases. The contractor says he is “managing my own time”, but whether the client has the right to tell the contractor how as well as when to do the work is not explained, and this would be important. In the Ready Mixed Concrete case, the fact that the company did not tell the lorry driver what routes to take or how to drive the truck was picked up as a key factor in the decision that the lorry driver was engaged under a contract for services.
Also, we have not heard what, if any, mutuality of obligation there is. Is the client obliged to provide the contractor with work and is the contractor then obliged to accept it? What would happen if the contractor arrived at the client’s site to find the project had stalled - would the contractor be paid for his time anyway, or not?
My opinion is that we need a good deal more information to make a judgement on whether this contract is within IR35.