Actions Speak Louder Than Words

We all know the popular cliché I’ve used to title this article and I think most of us can agree that it rings true in most cases too. Well it is also true when it comes to proving your employment status under the IR35 legislation.

Your written contract is of course your hardy evidence of terms and conditions, steeped with jargon; undeniable in its assured ink and signature. You have even had it checked by a professional status expert to ensure its compliance with the legislation, and it has performed brilliantly, so you have started work under the contract feeling perfectly happy that you are safe from any unexpected tax bills.
A while later and you receive a letter from HMRC enquiring into your accounts. Not to worry, you had all of your contracts checked and they were unquestionably compliant. Yet somehow you find yourself in court being told that you owe tax and national insurance, plus interest and a penalty (luckily your penalty is reduced because you had your contract assessed). What could possibly have gone wrong?

Your working practices. These are the true scenarios to your contract, your day-to-day working relationship with your end client, your reality; and they can turn the most robust of written contracts into tissue paper.
I may be being a little theatrical here, but your working practices will always hold more weight in an investigation than your written contract. After all, if a piece of paper you signed at the start of an engagement states that you have the right to provide a substitute, but when you tried to exercise this right, your client denied your substitute without reasonable grounds, clearly the right does not truly exist and therefore the clause in the contract is meaningless, and likely so is everything else it claims to be true. With one false claim and HMRC may assume equally of the rest.

Therefore, it is paramount not only to have a robust written contract, but to also ensure that your working practices mirror its terms. Which brings us on to the question of proof. How do we provide evidence for our working practices, particularly in cases such as the right to substitute where we don’t even test the terms? Well quite trickily really. In essence, you just need to ensure that everything is true. One way in which HMRC might try to determine the truth is by asking your end client, so confirming with them the terms of your contract is ideal, especially if you have a two-tier contract (i.e. a contract with an agency, who in turn has a contract with the end client). You can even go as far as obtaining written confirmation directly from your end client with a confirmation of arrangements letter, although it is not legally-binding and many clients are reluctant to sign such documents.

Don’t forget that your working practices may well have agreed with your contract at the beginning but in changed circumstances, re-evaluation is advised. As part of your working practices, you should not only be looking to ensure the terms of agreement are upheld in reality, but also that you don’t do anything that confuses your position with that of a permanent employee. Qdos offer both contract reviews and working practices reviews at affordable prices which are assessed by an in-house team of experienced status experts.

It can seem a little unfair that your contract can be deemed so unimportant in a flash, so if you are struggling to get your head around the fact that your hard-to-prove working practices hold more weight than your written legal-binding contract, just remember: actions speak louder than words.

By:Jane Hailstone

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