IR35: How PSCs can stop Control taking root on client projects

As HMRC-defeated journalist and presenter Eamonn Holmes will tell you, Control continues to be the major if not determinant factor in deciding whether limited company workers have fallen foul of IR35, the Intermediaries legislation.

Following the IR35 judgment against Mr Holmes and his Red, White and Green Ltd, I told ContractorUK that the main reason Control can be difficult to keep at bay for IT contractors is due to non-understanding of influencing parties within the working frame, writes Patrick Joyce of ProjectScopes.

SDS is the starting point, but Control must be addressed ever earlier

Let me elaborate. The typical PSC we see starts their contract with a Status Determination Statement, circulated among the supply chain. The SDS should contain contributions and inputted information from both the end-client and the PSC.

For that SDS to be accurate from the PSC’s standpoint, the PSC will have had to put ‘Control’ front and centre from the off. This is important as we’d say that right now, the misunderstanding of different linked parties on IR35 elements is a major issue at this initial stage.

Let say the PSC is part of a team on an Agile-based interim project. It’s at this very early stage that the PSC needs to be clear with the end-client in their methods as a contractor, and how their company intends to deliver its services.

In terms of timing, these are conversations which should take place in a B2B meeting, prior to the PSC even receiving the work.

Setting out your stall

Please note, both we and contractors are correct not to call these meetings ‘interviews’ because; well, they are not interviews, despite the frequency with which contractors receive an ‘interview’ placeholder in their inbox for a contract, from an agent or end-client!

The conversations themselves can represent a fine line for the contractor to draw then tread. Ideally, the Control aspect should not only be outlined but also run back through and confirmed in the meeting.

Unfortunately, it’s often the case that when the PSC outlines their rules of operation to the end-client, the representatives of the end-client can take things the wrong way, due to the reps simply not understanding of how contracting works. Contractors too, can get it wrong, by not being assertive enough about how they will work, for fear of missing out on a valid contract.

In this client meeting, there are a few practicalities and common points around Control to make sure you tick off.

Equipment

Despite bits of old IR35 case law concerning equipment still giving the odd contractor a nightmare or two, PSCs can absolutely use an end-client-supplied laptop, or end-client organisation software for projects such as DevOps, for security reasons. Usage of either is completely valid, and does not demonstrate Control.

For IR35 purposes, Control is much more about how the PSC carries out their work; whether the PSC determines the work they do, and whether the work is in any way directed.

Attendance

Where the PSC is carrying out tasks specified in the contract, being on-site at times is not, by itself, an inside IR35 signpost.

Indeed being face-to-face can be advantageous for the project. But this set-up i.e. the limited company and its personnel being present at the end-user workplace, must lie with the PSC; meaning the PSC should ideally be on-site without being requested to be on-site.

Workload

PSCs should work on their assigned and agreed tasks as per project schedule, meaning that for IR35 purposes, they should avoid ‘helping out.’ Even reviewing other pieces of work ought to be a no-no.

If the client is keen for the PSC to work beyond tasks and work specified in the contract, then an additional agreement should be drawn up. But in our experience, this rarely happens.

When in doubt, apply the ‘stand back’ test…

From looking at just the above three Control ‘flashpoints’ -- workload, equipment and attendance (and how to end up on the right side of the Control equation), the pattern of how PSC should operate can become quite clear. So standing back and looking at the whole picture is helpful to do, particularly when looking in from the outside.

But unless all the aspects are addressed correctly and in alignment, it can often lead to doubt (in the mind of engagers or client representatives as to what Control they exert). And doubt is too frequently the downfall as far as PSCs and Control are concerned – frustrating given it is an area of IR35 that is completely capable of being avoided if sorted from the off and addressed correctly.