Contractors unsure of latest Revenue 'advice'

Following the release of the latest Inland Revenue FAQs regarding IR35, independent contractors are no further forward in understanding their status as far as the new regulations are concerned. More questions have been added to the IR website including what to do if you do not have a signed contract, the Revenue's approval of the contract submitted by a PCG member and the right of substitution.

Contractors have given their first feedback to the new Revenue answers. In a way, there are no surprises. Question 42 confirms that the Revenue must see some sort of written agreement signed by contractor and client to give an opinion. In Question 43, the Revenue confirm that they have not approved a model contract, but the arrangements of one particular contract. Again, this is not new information. The big news lies in Question 44, the right of substitution.

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.

Essentially, the point seems to be that the right of substitution can only be genuine when it is shown along the line of contracts and if the decision to substitute lies with the Limited company, not the client.

Contractors are still waiting for detailed instructions on how to work within the new rules, as no new light has been shed here. Extra FAQs on a website are a poor way of communicating and do nothing to help genuine businesses understand the spin and FUD being disseminated elsewhere. It is this uncertainty that is killing businesses and driving people overseas.