Revenue dismisses points 1 to 19 as contractor publishes his full list

Thanks for the feedback so far to my posting.

Mr. Roback was asking about all 35 points mentioned. I have pasted the section of the letter sent by my accountant to the Revenue containing these points for your information. The Revenue have stated in their letter that points 1-19 are in their very own words "totally and absolutely irrelevant"!!

To give a bit more background, I was first told by letter that the Revenue were going to audit my company in December 2001.

The Revenue had an interview with Motorola on 13th May 2002. They were also attempting to interview AMEC officials, but as this was a site based project and the project had since reached completion, the team had been disbanded, so they were trying to speak with AMEC central office in England.

I received notification that all 3 contracts had been deemed subject to the intermediaries legislation on 7th June 2002. Their reasons for coming to such a conclusion were the points underlined in the list below, plus the fact that there was no substitute required during the duration of the Motorola contract. Seemingly during the interview with Motorola, it had been stated that if a substitute was required Motorola would have approached the agent. This is up for contention at present but our feeling is that even leaving the substitution issue to one side, the facts are so strong in my favour that this whole thing should be dropped.

Excerpt from letter to Revenue dated 30th October 2002. The underlining mentioned seems to be lost in the copying, the points underlined were no.s 16, 31 to 34, and 36 and 37.

Facts in Favour of Contract for Services

Underlined facts listed below are those listed in the Revenue's letter of 28th June, any points mentioned in that letter not listed below were either incorrect or irrelevant (but covered in previous letter of 25th July), all other facts below were omitted from Revenue letter:

1. Motorola employees work 8.00am to 4.30pm.

2. During the course of the contract Mr. A worked very irregular hours.

3. Employees receive sick pay, holiday pay, private medical insurance, company shares and are part of the company pension scheme. They also receive substantial redundancy payments if their post becomes redundant.

4. The fact that they receive company shares will mean that they also receive dividend payments that do not have national insurance payments deducted from them.

5. Motorola employees do not fill out time-sheets.

6. Mr. A fills in a time sheet for accounting purposes.

7. Motorola does not pay either Mr. A or Deltech Ltd. If the agent failed to pay Deltech then Motorola would not pay Deltech for work done, therefore there was no obligation for Motorola to pay Mr. A for any work done. This is the reality of the situation and attempting to invent a hypothetical one is flawed.

8. Contractors wear different colour badges to differentiate them from employees.

9. Contractors sit through a different induction to the one taken by employees.

10. Contractors do not have access to Motorola Sports and Social Club.

11. Contractors do not have access to Employee Health Promotions, i.e. discounts off local health club memberships.

12. Contractors do not receive discounts in local stores negotiated by Motorola for its employees.

13. All aspects above show vast differences in the way Motorola treats its employees and Mr. A and therefore Motorola are not perceiving him as an employee (Intention).

14. There are no design engineers employed by Motorola.

15. Mr. A is an employee of Deltech Ltd.

16. Mr. A was not entitled to any sick pay / holiday pay from Motorola.

17. Deltech Ltd is a VAT registered company and has been since its inception.

18. Deltech Ltd has an office complete with computer systems, very sophisticated plotting systems, desks, chairs, filing cabinets etc.

19. There is a long established record of contracts for numerous clients, and records of quotes placed to other companies that were unsuccessful.

20. Deltech Ltd and Mr. A have worked for more than one client at any given time, a project for Kuritec Ltd was completed whilst contracted to Motorola.

21. Deltech Ltd are responsible for all holiday pay, sick pay etc.

22. Deltech Ltd are responsible for all training required.

23. Deltech Ltd provided all necessary safety equipment.

24. The services to be provided to Motorola were the production of technical drawings and documentation along with project costings. Therefore, Deltech Ltd was providing a product. This product was passed to Motorola on completion, it was a physical entity. This product was priced by the number of hours taken to produce, hence the agreed hourly rate in the contract and the production of a time sheet.

25. Responsibility for the quality and performance of the product i.e. the technical documentation being provided lay with Deltech Ltd.

26. If the quality of the product was sub-standard to a point where damages or loss was incurred by the client then Deltech Ltd would be liable for such losses.

27. Deltech Ltd were not reimbursed for any expenses incurred in carrying out its duties.

28. Mr. A could not be required to do work outside the scope of the contract.

29. There were no overtime rates.

30. Mr. A was the sole person working on any project at a particular time. It was not a team effort. Mr. A did not attend Motorola meetings and was not responsible for the management of any other contractors or employees. The only professional contact there would be with other contract workers would be if project boundaries crossed with the potential of service clashes. There was no contact with Mr. Drennan or other Motorola employees during the course of a project with the exception of minor queries.

31. There was no supervision due to technical expertise.

32. Mr. A was responsible for decisions on how and when work was to be done.

33. Deltech supplied all safety equipment.

34. There was no formal period of notice.

35. The contract was terminated by Motorola due to project completion, there was no mention by either party of any employee rights during termination as both parties were fully aware that the contract was that of a company to company relationship.

Facts in Favour of a Contract of Service:

As per Revenue letter of 28th June:

36. Work was required to be done on Company premises. (See item 3 of appeal letter)

37. Computer equipment / office equipment was supplied by Motorola on their premises. (See item 5 of appeal letter)

Most of the points above, although based around the Motorola contract, are also relevant to the AMEC contracts. In addition to these there are several other key points that need to be noted with respect to the AMEC contracts. These are:

38. There are two separate contracts for two different projects. First ran from 26th March to 28th Sept 2001 and was to supply a piping designer for the North Site Flare project.

39. The second contract was awarded to Deltech Ltd, and was to provide piping stress design and consultation services for E4 Project, from 1st October 2001.

40. Deltech negotiated an increased hourly rate for the E4 project.

41. The E4 contract does not stipulate the supply of any specific individual, Deltech Ltd could supply any designer as long as they had the relevant qualifications etc (section 3.2). Therefore there is very clearly no requirement for Mr. Lafferty himself to provide personal service.

42. Both contracts stipulate the necessity of liability insurance, the E4 contract actually stipulates a minimum £500,000 of cover. Deltech Ltd had such insurance.

43. The risk of invoicing became clear during E4 contract as failure to produce an invoice resulted in payment being delayed by 9 weeks. Work carried out on week 37 was not caught until the invoice for week 46.

As you can see my accountant has been doing his homework on this. One thing that still puzzles me is the intermediaries angle, I know you say that my Ltd Company is the intermediary, but how can that in reality be removed from the equation? Maybe I am over simplifying things, but is it not just a case of asking the end client one question ie if there were no such thing as agents and you had a project to undertake, would you undertake the services of Mr. X as a) an employee or as b) a self-employed person for the duration of the project. Surely if the answer were b) then game over?

The Revenue state in their latest letter that companies use agencies for the simple reason of avoiding paying tax and national insurance etc. My accountant is making the argument that this may be the case in some instances but in the norm when dealing with large multi-national companies dealing with multi-million pound budgets for projects, sometimes even running into billions, it is a project management decision. To ease the mountain of paperwork, make these huge projects more manageable and therefore attempt to keep projects within budget, it has become the trend to single source many of the project requirements. This is why they use agents as the middle man when dealing with design companies. Instead of receiving 20 invoices every week from 20 companies they receive one invoice, usually quarterly. So instead of handling 240 invoices in a quarter they are handling one. This is logical and makes financial sense as it moves this burden onto the agent. This happens with most aspects of any large project today, from structural works to site security. Therefore the argument that, if it were not for the agent, I would be an employee of Motorola is simply a false one to make. If the agent were not in place, it would not affect Deltech Ltd, the only change would be the client would be Motorola and not the agency. Motorola would see the main difference, as they would have to employ extra staff to cope with the increased level of paperwork.

Once again many thanks for your input in advance.

--

AlexA