CAN THE IR35 BAD PENNY DROP FOR CLIENTS?
Right of substitution for a contractor limited company (PSC) acknowledges that a client is engaging a PSC, not an individual. If the PSC had no right to substitute, what if the main resource was unavoidably unavailable at a critical point where resource was essential to continuation of services? They’d be unable to fulfil their contractual obligations. It forces a possible future breach by the PSC, And infers personal service. Give me the main resource or get lost, whatever the circumstances.
Clients see HMRC Check Employment Status for Tax question ‘Do you have the right to reject a substitute’, and would always answer ‘Yes’. But that’s not the full question. The full question is ‘Do you have the legal right to reject a substitute in favour of an alternate resource outside the PSC control, to safeguard delivery of services.’
Right of substitution is a BENEFIT. The PSC is obliged to deliver, even if the main resource is unavailable. If you determine a substitute is unfit, terminate the services of the PSC, just as you would were the main resource unfit. No impact on IR35 status. And if your contractors are 34square members, intent and capability to substitute IF NEEDED, is irrefutable. And you get a full SDS service, for FREE.