IF YOUR CONTRACT CONTAINS RIGHT OF SUBSTITUTION...
If you’re a freelance contractor, engaged outside IR35, with a right of substitution in your contract, it’s better than not having one. But not much. Why should you care? If you're working for a medium or large private enterprise, it's not your responsibility anymore. That may be the case, but it won't take more than one or two HMRC victories under new legislation to fuel reluctance of clients to embrace outside IR35. It's in the interests of all contractors to protect your clients as much as you can. Now you CAN substantially elevate your credentials and therefore those of your engagements. Make your right of substitution real, remove the cracks and render it invulnerable to HMRC attack. You can also reap an added bonus of strengthening your case for being in business on your own account. For what's probably less than £1 a week after tax, to bullet-proof your right of substitution and feasible capability.
We qualitatively and quantitatively reviewed 36 IR35 appeals tribunals. All 1100 pages. 26 cases had weak rights of substitution, many with lines in contracts. In deliberation and witness testimony, HMRC is adept at breaking it apart, either because the right is too restricted or fettered, or perhaps because witness testimony contradicts the contract content. Sometimes back to back contracts aren’t sufficiently aligned. Or it could simply be that there's insufficient evidence of any intent or capability. HMRC won 17 of those 26 cases with an absence of a strong right of substitution and/or feasibility to execute in line with their stipulations.
The other 10 appeals cases had strong rights of substitution. HMRC won none of them. That’s right. None. 34square provides almost certainly the strongest package available for substitution:
- A ground-breaking actual substitution capability, with process automation tools to generate legally binding contracts that legitimately oblige the substitute company to deliver the services, whilst the main contractor’s company retains overall responsibility to the end client. Evidence of intent and capability, in line with HMRC stipulations.
- An optional Right of Substitution Declaration between contractor limited company and client, to avoid witness testimony issues and combat weaknesses in contract wording. This also triggers Status Determination Statement generation by the client, should they wish to use it.
All you need to do is join us. Or you can take your chances and force your clients to do the same. They’re about one in three if your client ends up in court. With a rock solid right of substitution, however, the chances of HMRC even raising a dispute are arguably negligible.
An added bonus with 34square is that you are also advertising your services on our platform for substitution work, which as stated at the outset, contributes to a demonstration of being in business on your own account, a factor that resulted in HMRC losing their appeal case against Kay Adams from the BBC.