Role changes and contract extensions: Ask Andy Answers

With 6th April 2021 approaching fast, we’re receiving lots of questions for Kingsbridge’s Head of Tax, Andy Vessey, to answer using his 20+ years’ of experience with IR35 legislation. This week, we have a new selection of topics for you, including role changes and contract extensions. And, of course, if your question isn’t answered here, you can find out how to submit one below.

I have an end client who has a Project Manager provided by my company. They would like to start using him as a Portfolio Manager. While he wouldn’t have any direct control over the end client employees in terms of line management, he would help manage the outcome of a number of their projects and the people who work on them within the end client’s business. Is this considered management of client employees? 

Equally, and probably more concerning, is the element of control and supervision. My view is that as a Project Manager you are told a desired outcome and then work towards trying to enable that outcome. As a Portfolio Manager, management are going to want to supervise and direct the outcomes of their portfolio much more closely than a single project. 

I have been advised that he is outside IR35, but I’m struggling to see how it would be interpreted that way.

In the Special Commissioner’s (now First-tier Tax Tribunal) case of Future On Line Ltd v HMRC (2004) the contractor, Mr Roberts, was engaged by EDS to carry out work on a project. During the course of the project, Mr Roberts assembled a team to carry out testing and personally interviewed some 160 staff. He had a manager to whom he was accountable and worked as part of a team managing other people. He was involved in discussions as to work allocation with the EDS project line manager and was expected to advise and assist other team members. Mr Roberts also attended meetings with interested parties alongside EDS employees. The judge considered that the contractor was an integral part of the EDS organisation but this was not determinative in itself. So, if your portfolio manager is working in a similar fashion, then he is likely to be part and parcel of the end client organisation.

The right of control that the end client can exercise over the portfolio manager must be to a sufficient degree to create a ‘master-servant’ relationship. Prima facie, it would appear that that test is met and a right of control exists although this test has four sub-elements to it, i.e., how, what, where and when. However, right of control is only one of the three key tests of employment status, personal service and mutuality of obligation being the other two. Of next importance are financial risk, business on own account and provision of own equipment. Following that are the minor tests of which integration is one but it takes on more importance than the other minor tests. When considering the employment status of a worker it is necessary to consider all these tests and then stand back and decide if the worker is genuinely self-employed or a disguised employee. It is not simply a question of isolating one or two tests and basing a determination on their results.

My client is a global engineering consultant. The contract to engage my services is between my UK registered limited company and one of its offices based in the EU (outside the UK). Would such an arrangement fall within IR35? 

If you are a UK resident and subject to tax in this country, then you must consider whether or not the contract is caught by IR35. If, however, you are working abroad and the time spent there makes you non-UK resident, then IR35 is unlikely to apply as there will be no liability to UK tax.

What’s the impact of my existing contract (currently assessed and insured as outside IR35) being extended past 6th April and under the new rules being assessed now as within IR35? Because of this situation I have currently told my client I cannot extend past 30th March.

If your end client deems your current contract as being outside of IR35 as from 06.04.21, then the off-payroll rules will not apply and you will continue to receive your fee gross and be responsible for paying all relevant taxes to HMRC. However, if they determine the contract falls inside of IR35, then PAYE tax and NIC will be deducted from your gross fee.

The off-payroll rules only apply to services provided post-06.04.21 so, if you carried out services prior to that date but received payment for those services after 06.04.21, then the off-payroll rules will not be applied to that payment.

How to Ask Andy…

If you have your own question for Andy, you can submit it using our handy online form. Andy will answer as many as he can right here on this blog.

In the meantime, if you’re curious about your IR35 status, or would like to help your client produce your SDS with confidence, take a look at the Kingsbridge IR35 Status Tool. For just £50 plus VAT, our unique hybrid tool – developed by Andy himself – will analyse your answers to carefully crafted questions before issuing you with an inside or outside IR35 determination. What’s more, if your case is borderline, it will be passed to one of our in-house IR35 specialists to examine and issue a determination. So, you really do get the best of both worlds as well as being able to have faith in your SDS.