IR35 case study 1 - a contractors IR35 story
All dates relate to the year 2000.
- On 25th January - signed to start with a new client with
a start date of 14th February. At
this point the contract was not checked for IR35 compliance
since the importance was not realised.
- Start work at new
client. Become aware that the contract is not reflecting the
true self employed status and would effectively be caught by
IR35 due to the contract.
- Talk to agency about
the contracts. The agency send the contractor their new contract
and agree to review suggested amendments to the existing
contract. The agency was not prepared to consider any other
contract submitted by the contractor - this would have involved
too much work on behalf of the client if every contractor did
- Contractor employs a
lawyer specialising in self employment law, employment
contracts, knows the IT market, and is up to date with IR35. The
lawyer discusses full working practices with the contractor and
reviews the contract in light of these. The lawyer produces a
contract report highlighting the areas that need changing, extra
clauses that need adding, and clauses that need omitting.
- The contract report is
discussed and agreed with the contractor.
- The lawyer then
contacts the agency on behalf of the contractor to negotiate the
contract. The agency are extremely helpful and after negotiation
the agency, the lawyer and the contractor all agree to the new
- Existing contracts are
terminated on the basis of both parties agreeing. A new contract
is signed and put in place. The new contract started on 3rd April 2000.
Why would the agency not
accept a new contract?
For the agency to accept a
new contract would have meant that the entire new contract would
need to be aligned to their existing contract with the client which
would be costly. It would also open the way for each new contractor
to present their own contract. This would prove to be costly in
terms of legal fees. As my lawyer pointed out, this 'amendments
route' was becoming the common practice amongst agencies who were
taking an active role in changing contracts.
What was in the contract report?
- The contract did not
allude to control by the client, but did not allude to expertise
- There was no mutuality of Obligation and a suggested clause was provided.
- Right of substitution
was in the contract.
- Basis of payment needed
to be monthly.
- Termination - there
should not have been a notice period (4 weeks) for the
- Termination - a clause
allowing the Client to terminate the contract for whatever
reason was removed.
- The clauses about
opting out the Working Time Regulations and Minimum Wage needed
removing since it was not required in a commercial contract.
- A whole section about
the project definition needed to be added. This detailed the
project and also the expertise that was being supplied by the
- There were also other
re-wordings of the contract required to ensure the intention of
the clauses were accurately reflected in the
What was the total cost?