Q. I have a number of questions based on the right of substitution. Firstly, what do I need in place to trigger it? Do I need a contract with my substitute and can I provide them with client information so they can deliver the service? Finally, is there a way to check IR35 compliance, with regards to substitution?
A. It goes without saying that for you to provide a substitute – which is a strong (albeit not definitive) indicator towards an outside IR35 engagement – you would be wise to have this detailed clearly in your contract, effectively meaning it has been signed off by your client.
In addition to having your right of substitution outlined in the contract, exercising this right will strengthen your position as an outside IR35 contractor even further. To do this compliantly, HMRC would expect the right to be not ‘unduly fettered.’ In short, this means the client should only be able to refuse the substitute if they aren’t suitably qualified or experienced.
Assuming that whoever you choose as a substitute is able to deliver the service you provide, you should have full discretion as to whom that person should be. It’s also worth bearing in mind that you retain full responsibility for paying the substitute. After all, the engagement is between your company and your client – not your substitute.
With regards to any contract between you and your substitute, as with all business engagements, it is, however, wise to have a contract in place. This, for example, could be along the lines of the contract that your company has with the agency or with the end-client, if no agency is involved.
We’d recommend you discussing with your client about the access the substitute requires before handing any sensitive information to them. In many cases, a client might provide new login details for your substitute. However, we’d urge you to run everything past them first.
For you to be confident of your IR35 compliance and to ensure you’re approaching substitution in the right manner, it’s well worth engaging the help of a specialist, who can carry out an IR35 contract review, assess your working practices and provide general IR35 advice.
This answer was provided by IR35 specialist, Qdos Contractor.
The right of substitution has always puzzled me. Given that (in Banking at least) a client will insist upon numerous checks on an individual before they’re allowed to work on site (checks which are costly and time consuming) and that, on a large IT project, it takes weeks before an individual can be productive, which client would permit this?
Someone I spoke to about IR35 insurance said that even if there had been a substitution for just one day, it would make a difference. Has anyone actually done this? It striked me as the most fanciful of the IR35 factors.
Unless I’ve completely misunderstood the matter. Wouldn’t be the first time…