End client contracts, non-UK agencies & clauses to check: Ask Andy Answers
If you have an IR35 question burning a hole in your head (and who doesn’t?) then now is the perfect time to ask it. Kingsbridge’s Head of Tax, Andy Vessey, is answering questions on all things IR35, calling on his 20 years of experience with the legislation. Andy has also defended more than 500 IR35 cases, and has won almost every single one. So, who better to get your IR35 advice from?
While Andy can’t promise to answer every single question he’s asked, he’ll answer the ones he can right here on this blog. Take a look at some of the expert advice he’s given so far.
How important is the End Client/Agency contract to an IR35 assessment or tribunal?
Sometimes, during IR35 enquiries, HMRC will seek to obtain a copy of the upper level agreement, i.e. between agency and the end client, particularly where there are anomalies between the lower level contract (between agency and the worker) and the actual working practices. It has been a longstanding problem that, in the vast majority of cases, contractors do not get to see the upper level agreement due to it being a confidential document. Contractors need to know that the clauses contained in the lower level contract are mirrored in the upper level contract to avoid the sort of damaging effects that Mr Bessell suffered in the 2008 case of Dragonfly Consultancy Ltd v HMRC.
I always ensure the contract between the Agency and my Ltd company is outside IR35, including having it independently assessed, but I'm concerned the End Client and Agency don't give it much thought. Essentially, if my contract and working practices are outside IR35, does it matter what the End Client/Agency contract looks like? Are there clauses that they should really be avoiding or putting in?
Some agencies will include a clause in the lower level agreement giving an assurance that this ‘mirroring’ exists and you should ask the agency to insert such a clause if it is absent from your own contracts.
Provided your day-to-day working practices support your contention that your company’s contract is outside of IR35 this should give you peace of mind but it is good practice to draw up a ‘Confirmation of Arrangements’ document addressing all the key issues of employment status and have this signed off by an official of your end client who can properly vouch for your working practices. This should then be retained in your IR35 dossier for production to HMRC in the event that your company is subject to any future IR35 enquiry.
I am a limited company working through a non-UK agency, and I am paid in a different currency. I am the only employee of my company, but I am allowed to put in a substitute. The end company is a large energy supplier . The agency has said that they won’t be affected by IR35 because they are not represented in the UK, do I fall into IR35?
If you are working overseas and are deemed to be non-UK resident by virtue of the Statutory Residency Test, then IR35 is unlikely to be an issue anyhow as you would not be liable to pay UK tax on your foreign earnings. If, however, you are UK resident then you still have to consider whether or not your company’s contract is inside or outside of IR35 by applying all the usual tests of employment status.
You state that you have a right of substitution which, if genuine and not fettered in any way - i.e. your own limited company is responsible for appointing and paying the substitute, and the end client cannot reject the replacement worker for any reason whatsoever other than professional suitability – then it would be a strong pointer towards self-employment. However, you should not rely on this alone and therefore consider other key tests such as right of control, mutuality of obligation, financial risk and business on own account.
I work in parallel for three clients: one in the UK, and another two in Europe. I do not think I am at risk of falling inside IR35 but would love a confirmation.
Assuming you are a UK resident then your company is required to consider the IR35 implications for each of its contracts.
Concurrent working for three different clients is a strong pointer towards self-employment, but HMRC will seek to look at each of the contracts in isolation and you should therefore consider all other normal tests of employment status, particularly right of control, personal service, mutuality of obligation, financial risk, and business on own account, to determine your limited company’s IR35 risk exposure.
How to Ask Andy…
You can submit your own question to Andy right here and he will endeavour to answer as many as he can while keeping your details confidential. If IR35 is on your mind, remember to take a look at our IR35 Protect cover to protect you, your agencies and your end clients from costs related to IR35 investigations, making you a safe bet when it comes to hiring a contractor.