IR35 Chronicles XXI

This is part twenty-one of our serialisation of an IR35 enquiry. To access the previous parts please visit our IR35 Chronicles Index.

Two weeks after her telephone conversation with Turpin of HMRC, a copy of the Status Inspector's letter to Graham Hargreaves arrived on Dee Fender's desk. That same morning she also received an e-mail from Mr Hargreaves confirming that he had also received a copy of Turpin's correspondence and asking for the IR35 expert's advice.

Mrs Fender responded that same day by simply asking Graham Hargreaves to respond to the list of questions contained in Turpin's letter and, having done so, to send her the electronic draft for her consideration before issuing to HMRC. She stressed that she would not be seeking to tamper with his evidence but rather to offer guidance on how the facts should be presented.

It took Graham Hargreaves a few days to produce the first draft but unfortunately he had made references to several employment terms and to Neil rather than BSOD Ltd which then provoked an exchange of e-mails between himself and Dee Fender until both were satisfied that the response was suitable for submission to HMRC. Turpin's letter had contained many questions and the extract below contains the more pertinent and relevant aspects of Graham Hargreaves response.

Q:  Please describe your managerial responsibilities in respect of Mr Down.
A:  I was the Project Manager during the time that BSOD Ltd were contracting to BIG IT. My role included various duties which included overseeing certain projects within my sphere of responsibility. Those projects usually included the use of teams which were made up of a mix of BIG IT employees and contractors. With regard to such BIG IT employees they were under my jurisdiction and part of my job was to supervise them. This was in complete contrast to contractors, of which BSOD Ltd was one. Although I would monitor the work contractors carried out this was only for the purpose of reporting back progress to BIG IT management. I did not tell contractors how to carry out their work and they were not answerable to me in the sense that an employee is to their employer.  I was responsible for signing off timesheets for contractors but this was simply to verify the hours worked so as to facilitate payment of their invoices. I must stress that this was not for the purposes of making sure they worked site hours that was applicable to BIG IT employees.  

Q:  Did you have the authority to direct Mr Down to undertake work other than that specified in his contract as priorities changed?
A:  No. If there was any work that needed to be done as a matter of urgency which was outside of BSOD Ltd's remit and there was no prospect of drafting someone in then I would put a proposal to BSOD and negotiate terms for carrying out the work. BSOD was at liberty to turn down any such proposal should they wish to do so.

Q:  Could you overrule any of Mr Down's decisions and/or methods that he employed in his work?
A:  Not as such. BSOD Ltd possessed a particular expertise which I and BIG IT trusted. It was therefore not for me to call into question the methodology they used in executing the services. During ad hoc progress meetings I would sometimes raise questions but only to satisfy myself that the work was meeting the specification laid down by BIG IT's customers.

Q:  I understand that you were responsible for renewing Mr Down's contracts at six monthly intervals. These were continually renewed during the period 1st January 2006 – 30th June 2009 suggesting that it was understood by both parties that there was little risk and an expectation that work would be offered and accepted on a continuous basis. On what basis were contracts renewed?         
A:  If a project was still in progress at the end of BSOD Ltd's contract period then it made sense to retain their services until the project was completed. BSOD was highly regarded and BIG IT both trusted and valued the services they provided. As such, and where possible, I would always offer BSOD first refusal. There was no guarantee however that BSOD would accept an offer of a new contract.  

Q:  Did you expect Mr Down to carry out the work personally at all times?
A:  As I understood, it was a requirement of BSOD's contract that Neil Down would perform the services until such time that either the contract was terminated or an agreed substitute of equal skill and experience was sent in his place. If BSOD had sent a replacement who was as good and as competent as Neil Down I certainly would not have objected although I would have been obliged to obtain management approval before allowing any substitute to set foot on BIG IT's site as it would have been necessary for such a substitute to obtain security clearance before commencing the services.

Q:  Did Mr Down ever send a substitute worker in his place or engage any helpers to assist him in his work?
A:  No but that did not mean that BSOD did not have the right to utilise such workers.

Q:  You have stated that it would have been unlikely that Mr Down would have been able to sub-contract the services to another service provider. This would suggest that this was because BIG IT required the personal service of Mr Down and him alone. Do you agree?
A:  I would not agree given my comments regarding substitution above. I was simply aware that it was company policy that once BIG IT had entered into a contract with a service provider they expected that company to fulfil the obligations of that contract.  

Q:  How was Mr Down regarded by other BIG IT employees and customers of BIG IT?
A:  BIG IT employees knew Neil Down was a contractor as he was identified as such by his security pass. As with all contractors, employees were always aware of their status as each time a contractor was engaged an introductory e-mail was delivered by HR to all employees. With regard to BIG IT customers they would probably have believed that Mr Down was part of BIG IT's business unless he introduced himself to a customer as an independent contractor.

In total there were about 60 questions which were either supplementary questions to the 'Statement of Working Practices' or related to subject matter not covered by that document. Some of these questions Graham Hargreaves was unable to answer as he had no knowledge or experience of the matters/scenarios presented. A response was submitted to Mr Turpin well before the 30 day response period he had stipulated.

Next week: Enough food for thought?   


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