Blog: IR35 reforms – the top 10 most irksome aspects (part 2)

If you found my first blog on the IR35 reforms helpful, let me share with you contenders 4, 5 and 6 in my ‘most irksome’ list.

Number 4 most irksome

At number 4 is the fact that when assessing the IR35 question for any contractor you have to work out the ‘hypothetical’ contract that could be said to exist between the consultant, their PSC and your own business. That involves reviewing the terms of your contact with the consultant’s PSC and also the PSC’s contract with the consultant. If the latter does not exist (which is often the case) then you have to interview the consultant to find out what the deal is between him or her and their PSC.

As a starting point, they may have little clue what you are on about! I’m not sure how many contractors with a PSC really appreciate what the set-up is and what their relationship is with their PSC. Are they just a shareholder and director or are they an employee too? Are they paid just in share dividends or in salary too? What about pension and any other benefits?

Only after you have all this information can you put it together with the terms of the agreement between your business and the PSC and form an overview of the whole picture to help you answer the main question, which is ‘Would this contractor really be our employee, but for the existence of their PSC?’

Number 5 – devilishly complicated

At number 5 is the fact that your assessment of what the terms of this ‘hypothetical’ contract may be will become a really complicated exercise if, as is sometimes the case, there may be an agency sitting in the contractual chain between your business and the PSC. (In fact, sometimes there are even more businesses in the chain.)

If this is the case you then need to assess your contract with the agency, the agency’s contract with the the PSC and also the PSC’s contract with the consultant. All of them need to be brought together to ascertain the overall situation. This is where it can get very complicated indeed.

Number 6 – very unhelpful

At number 6 I will offer up the fact that if you find that your business’s contract with the PSC has any of the following terms in it, then the contractor is almost guaranteed to be seen in law as your employee:

  • holiday pay
  • needing to ask your permission before taking holiday
  • sick pay
  • needing to comply with any absence management policy (beyond the mere fact of telling you they are sick)
  • any form of pension payment
  • any form of private healthcare provision or other insurance cover

(You may think it’s obvious that these sorts of terms shouldn’t be present in a self-employed contractor agreement, but you’d be amazed at what we’ve seen over the years…)

The remaining top 10…

If you can bear any more, I will share the remainder of my top 10 in a future blog. I’m confident you can’t wait.

If you’re facing the pain of the IR35 reforms and could do with some advice, support, a sounding board, a fresh pair of eyes or simply a hug, do please get in touch with me.  

Luke Menzies
Director

Email Luke or call 0117 325 0921