IR 35 Financial Risk Questions - Interpretation?

happyandcontented

I hope this is the right forum, if not, feel free to remove and place it correctly.
I have appealed my client's IR 35  determination (using the HMRC tool I am outside) 

I appealed on the basis that I pay upfront for fuel costs when travelling on business and additionally, I pay upfront for hotel costs and reclaim them, which usually takes 4 weeks to complete. I believe that the HMRC wording includes the above as an indicator that I am outside IR35. My client disagrees.

As an ASW I am denied the use of a company credit card as set out on page 1 of the handbook, yet they have answered as follows. 

They have denied my appeal using the Financial Risk area on the following grounds:
          Q - Will you have to fund any vehicle costs before your client pays you?                                      X = Me   XX= Company

Worker’s financial risk (vehicle)

This can include purchasing, leasing, hiring, fuel and other running costs for this work.  This does not include commuting or personal vehicle costs.

XX understanding is that the HMRC criteria relates to the actual purchase, lease, hire including fuel and running costs of a vehicle obtained purely to undertake this specific assignment.  XX does not require X to obtain a vehicle in order to deliver his assignment.  X is using his own personal car to travel to review meetings, seminars etc – this does not meet the criteria set out by HMRC.

 

The argument that X is purchasing fuel without use of a Company credit card is negated.  XX employees who are regular travellers on company business may have the benefit of a company credit card, it cannot be used for the purchase of fuel in their personal vehicle as this is then a taxable benefit.  All employees travelling on company business must wait for the expense to be reimbursed.

Q Will you have to fund any other costs before your client pays you?

This can include non-commuting travel or accommodation, or external business premises for this work only.

Based on the expense claims provided it is evident that some costs such as hotels and meals are being paid for personally by X prior to reimbursement by XX

 

Similar to the points made in the first response, employees of XX who are required to undertake regular business travel may have the use of a corporate credit card.  Employees who are irregular travellers have to incur the cost themselves prior to reimbursement.  However, as full reimbursement is made to X by XX for any expense incurred, in the same timescales as an employee would receive them, then the basis of appeal is negated. 

 

In both instances, if X were given the opportunity as a ‘regular business traveller’ to pay these expenses on a company credit card, he would be treated as an ‘employee’ and as such it is an additional indicator of IR35 in-scope status.

Are they correct to interpret the Financial Risk questions in the way they have, or am I correct? 

I am going to take some legal advice but I wanted opinions from experienced contractors. They appear to be making this determination for all those involved in Project Management whilst in other areas some people are deemed outside. Any help appreciated.

 

Pennywise

Paying for fuel and hotel before being reimbursed is VERY weak.  It's exactly what huge numbers of employees have to do on a daily basis.  When I was a lowly trainee, it's what I did - pay for my own travel & accommodation and then put in a claim form at the month end.  It's no indicator of "being in business" at all.

Sibbers123

You have to look at everything as a whole. No one thing will deem to to be outside IR35, likewise, one thing won't deem you inside of IR35.

Andy_L

AIUI the client takes the risk if the taxman decides you are inside. What's their incentive to agree?

If they want to employ you as inside can't you just up your rate to compensate?

happyandcontented

Those are questions taken from the HMRC tool and the answer I give is yes, I do that as a contractor. The fact that some employees also do that is irrelevant if HMRC are asking the question using the wording they do.

All the other answers to questions were accepted by the client, but they would not accept my answer to those two as Yes, for the reasons given. Those two questions are the sole sticking point between my being inside or outside IR35.

uknick

Happyandcontented, as has been said, if all you're relying on is how expenses are paid then you've two hopes for a successful appeal; Bob Hope and No Hope.  I spent over 20 years employed in the public sector and for the majority of that time paid expenses up front and then had to get them reimbursed once the budget manager deigned to sign them off.

If I was putting the case for being outside IR35 I'd cover the following as part of my case (I know most of it is covered in the HMRC tool)

How many other clients do you have?
In your role, are you told what to do, when to do it and how to do it
Are you filling a gapped role?
How many times has your contract been extended?
Or, are you supernumerary hired to fulfil a one off piece of work in a set time

Having said all that, if your client wants you inside IR35 just to protect them, I'm not sure there's a lot you can do.

Is it a coincidence you're the second project management contractor posting on here in the last month or so falling foul of IR35 changes?

happyandcontented

All those other points have been asked and answered to the client's satisfaction, and to the satisfaction of the HMRC tool. It is purely the two questions above that are the issues with determining my status.

uknick

In that case they're talking baloney.

From what you've written, the fact you don't get use of the company credit card supports your claim to be outside IR35.  Are they saying you have the right to ask for a company credit card?  As far as I'm concerned allowing non employees to use a company card raises serious governance issues.  If you can't have a card, how do they expect you to get reimbursed for expenses? 

I don't know if your case is in the public sector, but I've got contractors outside IR35 in the public sector who get their expenses reimbursed as soon as they're approved by the contract manager.

Before you pay for legal advice, what are the other contractors doing about this?  

happyandcontented

The other contractors are keeping their heads down until their contracts are due for renewal.
It seems that they have decided that the Project Management Directorate is inside, end of the story.
The IT function contractors are all outside and yet they claim their expenses in exactly the same way as we do.
They are saying in their response that my interpretation of the two Financial Risk questions is wrong, but I cannot answer anything other than Yes to those questions. As I do pay for both petrol and hotels up front, so how can I answer No? 

I agree they are stupid questions to be included in the determination because employees might do that as well, but they are the questions. I cannot answer them any other way. It is Public Sector.

uknick

When I replied I didn't realise you were the person who posted last month about the same issue.  Now I have a fuller picture I'll stand by my previous comments; I struggle to see how a project management team can be anything but inside IR35.  I'm assuming you work full time for the client, work to departmental ways of doing things and have a regular oversight by departmental management.  In addition, you said the contract had been renewed in the past (many times?).  Out of interest, how long have you been contracting for the department?

Apologies if my assumptions are incorrect, but it does appear as if the department are implementing what they should have done back in April 2017.      

happyandcontented

It is a PM role on a project with very specific requirements that cannot be filled, other than by a specialist, with the correct qualifications.  It is not a bog standard PM function. The project has been ongoing since 2018. I can't really give more detail as it might identify the company.