Dear Contractor Doctor
I am a limited company contractor currently working with a local authority client via a consultancy.
The consultancy is trying to force me to attend a two-day teambuilding event in a hotel, but I have refused, being concerned about IR35 risk. My concern is exacerbated by the client continually trying to dictate working hours, insisting it should authorise holidays and the like.
Following my refusal, a contractor working for the consultancy shouted at me during a phone conversation, insisting I should ‘toe the line’ or I would never work for the organisation again.
I feel I am being bullied into attending a teambuilding event that places me at greater risk of IR35. What are my options?
Contractor Doctor says:
“Based on the overall client expectations and the hints of what the client may say about the working relationship if questioned by HMRC during an IR35 investigation, my suggestion to a limited company contractor in such a situation would be to get out fast,” warns Roger Sinclair, of contractor legal specialist Egos.
“Furthermore, the client may be liable for the bullying actions by its staff, should the contractor wish to take action about the situation.”
Teambuilding exercises potentially increase IR35 risk
According to Sinclair, the clue about the IR35 risk posed by teambuilding events is in the name: “By attending a teambuilding event, a contractor is implying that they may consider themselves as part of a team, which from an IR35 perspective is not very constructive.”
Sinclair believes that neither are the other control factors highlighted by the contractor, such as the attempt by the client to dictate working hours and authorise holidays.
“What is of greatest concern is what the client might say about its view of the working relationship, if approached by HMRC as part of an IR35 review,” continues Sinclair. “By its actions, the client is hinting that it may consider the relationship to be more closely akin to one of employment as opposed to self-employment; it that’s the case, they’re likely to communicate this to HMRC.”
Contractual obligations and termination
Sinclair confirms that if there is no express contractual obligation for the contractor to attend such events, then there are no grounds for the client to terminate the contract if the contractor refuses to; nor is it likely that a term might be implied that might force the contractor to attend.
What is of greatest concern is what the client might say about its view of the working relationship, if approached by HMRC as part of an IR35 review
Roger Sinclair, Egos
“However, to ensure there is no implied mutuality of obligation, ideally the contractor should have ensured that the contract did include a clause to the effect that the client could terminate the agreement at any time and without reason.
“This is a minor commercial point to give away because in practice one finds if a client really wants to circumvent the clause, it will generally find a way to do so, via honest or dishonest means – regardless of what the contract says.”
The Protection from Harassment Act
Although contractors do not benefit from employment rights, Sinclair notes that the general bullying and abuse suffered by Lu may amount to harassment and, if so, may be actionable.
“Under the provisions of the Protection from Harassment Act, the client may be liable for bullying by their staff,” highlights Sinclair. “However, because it may be another contractor and not an employee doing the bullying, an alternative strategy may be possible.
“In response to the demand to ‘toe the line’, the contractor could speak to their client to defuse the situation and say: ‘This is what I have been told, was the person actually authorised to say this to me?’.
“But, as in any situation where making false statements may cause another to suffer loss, they should be very careful to remain one hundred per cent accurate, and resist any temptation to exaggerate.”
Sinclair concludes: “There is a variety of reasons why a contractor may wish to extract themselves from a situation like this, not least for personal peace of mind, so terminating the contract may be the preferable option.”