Main Contract Inside IR35
We will look now at someone who has his main contract inside IR35 but has other contracts which are not.
Praveen is the sole worker, shareholder and director of P Ltd. He goes direct to the client and also has a few small contracts with other clients.
He has been with the client for 4 years with year-long contracts and his client pays him monthly.
Praveen wouldn‘t be able to send someone else to substitute for him. That’s even though others could do it, as the client wouldn‘t allow it.
He is part of a team and the client decides when he has to provide his services. He also has to ask them if he can have time off.
Supervised by the Client
He is supervised by the client and told what to do. He has to do it from the client‘s premises.
At the start of the day he has meeting with the client and other members of the team.
The client provides all his equipment.
He does other contracts for other clients and all of these are outside IR35 as he decides what he does and how to do it.
However, his main contract is inside IR35.
Why Praveen‘s main contract is inside IR35
Direction and Control
He has to get permission to go on holiday and the client decides when he will do the work. This, therefore, gives a strong pointer to IR35 applying.
The client tells Praveen what to do and he attends team meetings meaning this a strong pointer to IR35.
Personal Service
He has to provide his service personally and could not send a substitute making this a pointer to IR35.
Financial Risk
They pay Praveen monthly just like employees and his only financial risk is that the client wouldn‘t pay him which is highly unlikely.
This is a weak pointer to IR35.
His main contract is inside IR35 because:-
1. The client controls what he does
2. It has to be him that provides the service
3. The way he works and operates is very similar to that of permanent employees
He does other work for clients and those contracts are not disguised employment.
However, HMRC look at each contract separately to see if it is inside or outside IR35 and the contract and modus operandi with the main client brings him inside IR35.
ITContractor.com Comment
It‘s hardly credible that a guy who finds the business himself and has multiple clients is a disguised employee.
How many permies have other clients?
This just goes to show you, therefore, that the whole way a contractor operates should be taken into account.
We had been told, moreover, that HMRC were going to change to looking at the way a contractor operates as a whole rather than on individual contracts.
Remember this legislation was brought in to catch those people who left work at a firm as an employee and started on Monday at the same firm as a contractor.
So, how far away is this guy from that?
If this guy is a disguised employee with his main contract inside IR35, then I‘m Screaming Lord Sutch.
Also, if a guy is so good, so highly rated and has such specialist skills how does this work against him when your common or garden contractors has such skills and knowledge that he could easily send a substitute to replace him and then be more likely to be outside IR35?
It‘s becoming a bit of a joke.
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