1. I tried to understand my potential client’s requirements, tailored my offering, stressed my USP (unique selling proposition) and key benefits, then answered reservations and moved to close the deal. At which point I drafted a contract describing the agreed relationship

or

2. I obtained a standard contract from an accountant, dropped it on the Client’s table and said ‘sign that or I put up my prices by 30 percent’

I went for the first option, but apparently many contractors are adopting strategy No 2 in trying to persuade clients and agents to change the way they work. In so doing they are compromising their chances of achieving their objectives. Those who are advising this course of action appear only to be interested in the short term rewards they might gain and are giving little thought to the risks they are putting the way of the Contractor.

I have seen some of the ‘standard’ contracts on offer. Consider these two clauses in particular.

The supplier may at its absolute discretion send a substitute to perform the scheduled works. This right to send a substitute is unfettered and unlimited and agreement with the client is not required in any circumstances nor does notice of sending a substitute need to be given to the client.

And this one

The client agrees that it does not have first call on the services of the supplier and cannot require the supplier to give the client any priority over another client.

Pass a contract with these clauses to the client and it will find its way up the food chain to their legal department for advice, which will typically be as follows:-

Thanks for passing me the proposed Contract from MGB Consultancy Ltd.. It provided the department with some light relief on a dull day. You asked ‘what do these clauses mean’? Well, basically, having agreed to take on the services of this consultant, presumably based on a CV supplied by Acme and Bodger, preferred Agent, this Contract will allow MGB Consultancy Services Ltd to ask Auntie Jean to turn up and code your mission critical software. To cap it all she will be sitting using your phone to get more lucrative contracts for her nephew due to the fact that she does not have to give you any priority.

The good news is that MGB Consultancy Services Ltd have thoughtfully included a clause stating that you or they, may terminate this Contract without giving any reason and with immediate effect. Why go through that anguish? Terminate it now. (That is legalese for ‘You can poke this where the sun does not shine’

In this case and many others Contracts like these clearly do not reflect the actual situation. They are driven by IR 35 and the amazing ability of Accountants and Lawyers to feed off the ever increasing raft of red tape handed down by Messrs Blair and Co. As it does not reflect the reality of the working relationship its sole purpose appears to be to evade tax. Before April 6th it was ‘avoid’ which is above board, it will be ‘evading’ after April 6Th (which is on a par with refusing to pay your poll tax; (now what made me think of that I wonder? ).

Based on the legislation MGB Consultancy Ltd will carry the can for back tax and penalties. But, as employment lawyers have been warning for some time, they will not guarantee that clients might not be exposed to potential employment liabilities on the issue of contractors working under conditions of disguised employment.

Sorry to be blunt, but we are getting emails and reports of doors slamming shut as a result of this ill advised tactic. Agents, encouraged by advisers, looking for fresh meat and easy money, are taking the easy option out and signing contracts irrespective of the actual relationship. The result will be potentially disastrous:

The use of these 'formula' contracts is taking pressure off the Agents to help educate clients to make the change. Meanwhile it is the Contractor who will be exposed to back tax and penalties.

The irony is that there is a good commercial case to be put to Clients to make the change.

To achieve that you first must get the Client to understand why it would be beneficial to change. Forget contracts until this is achieved, all you will do is turn them off.

For some help on this check out this article:

Having brought your client up to speed on the issues and the consequences explain to the client how you can both win under the new rules. For example, look at the PCG sample contract for a starting point, but use the free PCG legal help line to help tailor it to fit. As a PCG member you can also take advantage of their free tax investigation insurance to have an ex revenue Inspector take your case on if the Revenue decide to visit.

For those who cannot get this achieved before April 6th then continue the negotiations. In many cases the relationship is one of self-employment, but the client just does not realise it yet. Hopefully once they have woken up they will agree that this has been the case and date the contract from April 6th.

Good luck

Andy White