Why Dragonfly got caught by IR35

A combination of factors brought this case down. The simple fact that it concerned a succession of contracts and extensions, commencing before the introduction of IR35, all for the same client, the terms of which contracts changed in details from contract to contract, left a fair degree of uncertainty as to what the terms actually were. Plus, the succession of changes, intended to create a more IR35-friendly background, probably lead to the conclusion that they were solely there for that purpose, and thus undermined their own credibility – the damage had already been done.

The succession of extensions compounded the risks – just as there are ways in which a later and better worded extension can potentially improve the position for earlier periods, provided it accords with reality, the converse can potentially apply – i.e. earlier less favourable terms can drag down later and more favourable terms. It’s a question of whether or not one can show that the later term in fact more accurately represents the reality.

It has long been recognised that overstaying one’s welcome with a particular client can compound IR35 risks, particularly where (as here) an appearance is created of the individual gradually becoming integrated into a team.

The fact that the agency-client contract had been entered before IR35 was even a twinkle in the eye of Gordon Brown that clearly did not help!

On Control, the case makes clear that where

• an engagement is to do work allocated as the contract progresses (as opposed to agreed at the outset), that may be capable of amounting to a sufficient degree of ‘control-what’

• there is a submission to guidance, or monitoring, or appraisal, that may be capable of amounting to a sufficient degree of ‘control-how’ to put the hypothetical relationship between individual and client at risk of being considered to be one of ‘employment’, for IR35 purposes.

Clearly, contractual provisions in early contracts which expressly provided that the contractor company was engaged to provide the individual to perform services under the client’s

• ‘direct supervision and control’ (first contract)

• ‘direction’ (second contract)

and requiring the individual to comply with ‘customary rules and regulations for the conduct of the client’s own staff and the client’s customary working procedures and security measures’ were unhelpful, even as background and not specifically relied on in the conclusions. It’s hard to interpret them in any other way than that the individual was expected to ‘fit in’ and become part and parcel of the client’s organisation as if he were an employee.

The true meaning of Mutuality of Obligation – ‘MOO’ – may be taken to have been further clarified; whilst it remains a negative from an IR35 viewpoint to be entitled to payment other than for services actually provided, to avoid that is not a complete get-out; at its barest essential, an obligation to provide services personally (i.e. without a genuine and unfettered right to substitute), in return for payment, will generally be regarded as sufficient MOO to constitute the basis for an employment-type relationship, if other factors too support that conclusion. So it must now be accepted that MOO can exist, without any obligation on the part of the engager to either provide work, or to pay in lieu; though of course if there were such obligations, they would clearly be additional negative factors.

On Substitution: the contractor was a 'one-man' company, and it was said that its sole raison d’être was to supply the individual’s services; the suggestion was made that the fact that such a company entered a contract which did not mention the individual by name might not of itself be sufficient to undermine the implication of an obligation to provide services personally. Admittedly here it was in the context of a sequence of contracts, of which some earlier and some later did name the individual. Nevertheless, this gives some cause for concern.

Two or more contractors might consider using a ‘partnership company’, to help avoid the suggestion that the sole raison d’etre is to supply the services of but one individual. They would need to manage this themselves, of course, to steer clear of the MSC legislation. But for such a company to contract for specified services, without any individual being named, would clearly help avoid the suggestions here that the only implication was that the one person behind the company would be doing all the work.

Overall

Whichever way one views it, this is a case which sets out the detailed interpretation of IR35, in a way which is clear and logical, and will provide a valuable first point of reference for the future. You may not like it, but at least this spells out what you have to do to work around it!

Analysis written and provided by Roger Sinclair, a legal consultant at Egos, a legal advisory for IT contractors.

G & G Recruitment gets RSS feeds

G & G Recruitment solutions are happy to announce that candidates can now subscribe to our all new RSS feed which will allow candidates to keep abreast of all our latest jobs quickly and efficiently. We are hoping this will not only aid our candidates in applying for jobs but, also help our client's as it will increase the number of applications for our roles.

RSS is a family of Web feed formats used to publish frequently updated content such as blog entries, news headlines, and podcasts in a standardized format.[2] An RSS document (which is called a "feed" or "web feed"[3] or "channel") contains either a summary of content from an associated web site or the full text. RSS makes it possible for people to keep up with web sites in an automated manner that can be piped into special programs or filtered displays.[3]
The benefit of RSS is the aggregation of content from multiple Web sources in one place. RSS content can be read using software called an "RSS reader", "feed reader" or an "aggregator", which can be web-based or desktop-based. A standardized XML file format allows the information to be published once and viewed by many different programs. The user subscribes to a feed by entering the feed's link into the reader or by clicking an RSS icon in a browser that initiates the subscription process. The RSS reader checks the user's subscribed feeds regularly for new content, downloading any updates that it finds and provides a user interface to monitor and read the feeds.
The initials "RSS" are used to refer to the following formats:
Really Simple Syndication (RSS 2.0)
RDF Site Summary (RSS 1.0 and RSS 0.90)
Rich Site Summary (RSS 0.91).
RSS formats are specified using XML, a generic specification for the creation of data formats. Although RSS formats have evolved since March 1999,[4] the RSS icon ("") first gained widespread use in 2005/2006.

Successful Recruitment - Honesty by all

Successful recruitment depends on a number of things.

A. The right sales staff to get the initial role on within the client.
B. The right consultant to ensure that the client receives the service they deserve.
C. The right candidate for the client's role.

The last one is the hardest. One of the reasons for this is a breakdown of communication and a lack of trust between the Recruitment Agencies and the candidates generally caused by pre conceived perceptions of Recruitment Agencies. It is true, there are some Agencies out there that will lie, push, conceal and generally do anything to ensure that they get a placement.

At G & G Recruitment we are focussed on ensuring we listen to candidates’ needs, we are honest and up front, we provide regular feedback and do not push or cajole them into interviews or roles they are not interested in. This has led to us having many happy candidates. But, it has also led to us being stung by candidates that still do not trust us. All we ask is that candidates do as they say.

A. Make sure you mean it if you say you wish to go forward for a role, after being asked about location, salary, organisation, role and any other details you may request.
B. Make sure you mean it when you confirm an interview.
C. Make sure you mean it when you accept a role.

We have recently been stung by the whole "emu" process of candidates who mysteriously become incredibly quiet after confirming they wish to go forward for a role, confirm an interview or even accept an offer of employment. They were given every opportunity to say no. We would much rather candidates said no at the start of a process rather than not turn up or not answer their phone. This lack of respect comes from the pre-conception that all agencies abuse the candidates and will do anything to get a placement. But not all agencies are like this, in fact it is an ever decreasing minority. I understand that sometimes things change but, is it really that hard to call or send an e-mail when things do change rather than wait till the last minute or even not bother at all. I have heard the saying, look out for number 1, don't worry about saying yes to every job opportunity. But really, what is the point of going forward for a role you would never accept. Plus, you may think that it does you no harm in doing the "Emu" but, your name is remembered and will not so readily be forwarded to a client when you are next looking for work. What goes around, comes around.

I am thinking, would candidates be so willing to do this, if like agencies they could be rated on websites.

I do apologise if this sounds like a bitter rant but, I truly do hope it gives an honest picture of how trust and honesty in the recruitment process could really benefit all parties.

Any comments on this, please do contact us on info@ggrecruitment.co.uk or simply leave a comment on this post.

Happy Summer all - it appears to have arrived!!!