IR35 Traps

As a PSC contractor if you have become integrated into the business, you could fall foul of one of the IR35 Traps!

Are you described as part of “the team”, do you have business cards, company phones or invitations to the client party, and so on? AUCAE take a look at some of the IR35 traps that could leave you exposed with HMRC.

With a normal employee / employer relationship integration is something most companies actively aim for and so is something you need to be aware of the legislation is updated with “new” IR35’s hypothetical employment status from April 2020.

Application of internal policies and procedures that you use for your employees will also cause issues under the new rulings. Some examples:

Contractor Induction and Training

You are being hired as an external resource on the basis of your specialist skills. Therefore training/induction should be limited to the essentials of functioning safely in your building – locating the coffee machine, the loos and the fire escape! You may be able to get away with training on any particular equipment which you may not have seen before, even as a specialist.

Contractor Administrative Policies

If the end client is issuing you with procedures around expenses claims, holiday booking, sickness reporting, IT/email access, etc. then this would be a big red flag to HMRC.

Contractor Grievances and Complaints

If you have a grievance or issue with the business then you should be directed via the Legal, Commercial or Procurement teams and NOT via the HR department unless they include allegations of discrimination or other misconduct by your employees.

Performance and Conduct Management

As a genuine contractors you have no general right to be warned about possible adverse consequences (including the termination of their contract) if their performance or behaviour is substandard.

This comes from case law arising out of the unfair dismissal regime, which applies to employees only. The end client has a contract with the PSC and can be terminated at any time by the notice provisions which it will inevitably contain. But what if you are unhappy about a particular aspect of your PSC contractor’s work but not so much that you want the cost and disruption of terminating and retendering all the services in question? The client needs to follow a complaints process that should be included within the PSC contract, addressing the complaint to your PSC ensuring that any deficiencies corrected by yourself (i.e. unpaid) and not at the cost of the end client as would be the case for an employee.

They should not offer any right of appeal! As with grievances, it is also the case that any such improvement notice would come from Legal, Commercial or Procurement, not HR.