This is part fourteen of our serialisation of an IR35 enquiry. To access the previous parts please visit our IR35 Chronicles Index.
Right on cue, the promised letter from Turpin landed on Dee Fender 's desk, setting out a list of questions borne out of comparing the information the Status Inspector had assembled from both Neil Down and BIG IT to date.
Dee e-mailed a copy to her client and asked Neil for his response within two weeks if that was convenient. Neil promptly obliged and Mrs Fender then composed the following reply to Mr Turpin:
Q: Mr Down has told me that before he was offered the job at BIG IT he was interviewed by both the IT Director and Project Manager which they have confirmed. BIG IT has also stated that a member of their Procurement team would also have been present. Can you confirm that this was the case and what that person's role was during the interview process, e.g. was your client subjected to psychometric testing?
A: My client did not attend an interview but rather a business meeting with the IT Director and Project Manager only. He does not recall any other BIG IT official being present at that meeting and he was certainly not subjected to any HR protocol that employees may have undergone.
Q: BIG IT has advised that all new staff members, regardless of their employment status, have to go through an induction process lasting a few hours. The process involves not only health and safety instruction but also a briefing on the company's internal rules and housekeeping matters. Mr Down, however, has stated that his induction only lasted an hour and comprised of health and safety instruction only. Please explain why your client would not have been subject to the same process as all other new workers.
A: You will have to ask the end client as to why they did not require my client to undergo their normal procedures but Mr Down reiterates that he was only briefed on health and safety rules and regulations pertinent to on site working.
Q: Was Mr Down provided with a copy of the staff handbook?
A: Yes, this was given to him when he was allocated a desk.
Q: I understand that BIG IT provide training upon occasions where a particular computer programme or piece of software, unique to the end client, may be foreign to a contractor. Did Mr Down ever receive such similar training?
A: Not training but rather instruction. As my client worked within a team that included BIG IT employees, anything that was alien to Mr Down due to its esoteric nature was explained to him by a permanent worker on a learn-as-you-go basis. These occasions, however, were rare.
Q: What was the ratio of contractors: BIG IT employees within the team Mr Down worked in?
A: This varied but typically four contractors and two employees.
Q: BIG IT has confirmed that it would not allow your client to sub-contract any of the work. Is this your client's understanding too?
A: As far as BSOD Ltd is concerned their contract affords them the right to sub-contract any of the work, although this never happened in practice.
Q: Due to the BIG IT's confidentiality and security policy it would be impractical for a contractor to engage a helper to undertake work either on or off site. Has your client ever used an assistant to help him with his work?
A: BSOD Ltd's company secretary and other shareholder, Mrs D Down, has provided administrative assistance when required but there has never been a need for my client to bring in outside assistance as Mr Down has been able to cope with the workload and therefore retain company profits. BSOD's contract does suggest that the company can engage helpers as and when necessary.
Q: Mr Down's BIG IT e-mail address appears to indicate that he is simply another employee of the company despite your client suggesting that all internal e-mail and telephone listings denoted that he was a contractor. Would you agree?
A: No. Mr Down apologises for any confusion caused but when he informed your colleagues that beside his name appeared the word 'contractor', he was referring to the telephone list. All contractor e-mail addresses are grouped internally under the heading 'Contractors' or 'Temps'.
Q: Mr Down says he was not provided with BIG IT stationery, yet access is given to such company stationery. Please confirm that your client did have access to stationery.
A: My client would have had access to stationery but only in the sense that he could have walked into the stationery cupboard and helped himself but he chose not to as this would have been unethical as he was not an employee of BIG IT.
Q: Sections/departments of BIG IT hold social functions throughout the year. Did you client ever attend any of these and, if so, was he required to pay?
A: Mr Down recalls attending a summer BBQ which was free of charge and a day at Ascot races where he had to pay a reduced fee. He has also attended two Christmas parties for which BSOD paid for.
Q: Your client has advised that he had no responsibility for BIG IT employees, yet the end client has informed me that they expect contractors to mentor their employees. Did Mr Down therefore mentor any BIG IT employee(s)?
A: Not specifically. As contractors worked within teams that included permanent workers, then an ongoing exchange of knowledge and skills would take place during the term of the project.
Q: I understand that contractors are required to make their own Professional Indemnity (PI) insurance arrangements. Please provide me with copies of all PI certificates for each year your client was working for BIG IT.
A: Please find attached copies of all PI certificates, as requested, together with copies of Employers Liability and Public Liability certificates too. The need for such expensive insurance coverage demonstrates the financial risk that BSOD were exposed to.
Q: Please provide copies of say six timesheets and invoices for each year your client was working at BIG IT.
A: Please find enclosed copies of timesheets and invoices requested. You will note that there are differences in hours worked and amounts invoiced, therefore indicating that my client did have some autonomy over the time spent delivering the services.
Q: Your client was remunerated by reference to an hourly rate of pay. It is difficult therefore to see how he could have increased his earning capability other than working overtime. Do you agree please?
A: BSOD has always insisted and negotiated an hourly rate of pay as this ensures profits are maximised and, by doing so, my client demonstrates business acumen and shrewdness. As long as BSOD carry out the services to satisfaction and impress the end client, then further work and recommendations follow.
Q: BIG IT has indicated that they would not accept a substitute worker being sent in the place of your client and the upper level contract between agency and end client supports this. Furthermore, BIG IT has advised me that if a contractor was absent from their work for any great length of time then their contract would be terminated and a replacement sought by the end client. Until such time that the contractor is unable to perform the work or the end client instructs otherwise I conclude that Mr Down was required to provide his own personal service. Can I have your agreement please?
A: BSOD's contract allows them to replace Mr Down with a substitute worker. It was always my client's understanding therefore that they had a right of substitution and was never told otherwise. Please provide further details of the clause that appears in the upper level contract that supports your contentions.
Q: Your client indicated that approximately 5 – 10% of his working time was spent at home, yet BIG IT has told me that they do not permit this due to security and confidentiality reasons. Does your client possess any evidence of work carried out at home?
A: Mr Down previously informed your colleagues that work carried out from home was research and the compilation of reports. Copies of reports can be provided if you are willing to accept these were written from home.
Q: BIG IT has confirmed that contractors are expected to work core site hours of 08:30 – 17:30, Monday – Friday but Mr Down maintains these were only a guideline and he was able to exercise discretion over the hours he worked. Does he have any evidence of this please?
A: Please refer to copy timesheets and invoices referred to above. You will note that there were times when my client performed the services for half a day.
Q: The end client has verified that they have the ability to move a worker from task-to-task, without notice, should the need arise. Mr Down has previously told HMRC that this actually happened to him which indicates that BIG IT had the right to control your client as to what needed doing. Do you agree please?
A: The incident that my client previously referred your colleagues to related to a time when Mr Down was asked to help out, in an emergency, on another piece of project work. My client was not told that they had to comply but nevertheless BSOD agreed to undertake the work in the company's ongoing attempt to impress BIG IT with their willingness to be of service and, in turn, secure future works.
Q: BIG IT has told me that they can overrule a contractor where they are not satisfied with the standard of workmanship. This indicates a right to control how the work is done. Would you agree?
A: This never happened to my client. BSOD were engaged for their expertise and, apart from end of phase testing, the company's work went unchecked.
Q: BIG IT do not permit any of their workers to provide their labour to anyone else and this is endorsed by the upper level contract. It appears therefore that Mr Down's exclusive service was required just like that of any of their employees. Do you agree please?
A: Again, I would ask you to provide specific details of the contractual clause you are referring to as, according to my client's contract, there is a right for BSOD to provide their services to other customers provided they are not competitors of BIG IT.
A copy of the response was e-mailed to Neil inviting his agreement before submitting to HMRC, which he duly gave.
Next week: Turpin is defiant.
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