Working in the public sector? An FAQ about IR35
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  1. #11

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    Quote Originally Posted by TheFaQQer View Post
    New section added above about retrospective changes of status and clients attempting to deduct tax and NI from future invoices, based on anecdotal evidence of this happening.
    Thanks for doing this thread, it's great

    You provide ample caveats above, but on this point:

    My feeling would be that the past tax must fall to the client / fee payer because they did not take reasonable care and the error was not made in good faith, so the dividends already paid would be allowed, the fee payer should pay the tax, but from this point on future invoices will be paid net of income tax and NI.
    The issue with a retrospective change is, I believe, that the fee payer has now made an assessment, as is their (new) responsibility, whereas the old assessment (and corresponding action) was the responsibility of the PSC (and by extension, its director/s). I assume that's what you mean by "retrospective", i.e. an engagement that straddles the old and new legislation. If you mean a retrospective change post April 2016 (i.e. post the new 10(2) of the ITEPA), then I agree. At the very least, I think it's worth making this distinction. Post April-2016, it's the responsibility of the fee payer, end of story, and any attempt to claw this back, even with a contractual clause that might allow this in principle, is, in my opinion, likely to fail.

    If you're referring to a change in assessment that straddles the change in legislation, I would view the situation as being for the PSC to correct any historical error, assuming it needs to be corrected at all (because this could be disputed). Further, I would view any attempt by the client to operate a deemed payment, retrospectively, when it was the responsibility of the PSC to do so would be not in keeping with the ITEPA and hence unlawful. But if the old assessment by the PSC was, in fact, incorrect, the responsibility would rest with the PSC to correct the old accounts and pay any tax/penalties due for their incorrect assessment. Again, my opinion is not worth any more than yours, since I'm not an expert, but the above seems more logical to me.

  2. #12

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    Quote Originally Posted by jamesbrown View Post
    The issue with a retrospective change is, I believe, that the fee payer has now made an assessment, as is their (new) responsibility, whereas the old assessment (and corresponding action) was the responsibility of the PSC (and by extension, its director/s). I assume that's what you mean by "retrospective", i.e. an engagement that straddles the old and new legislation. If you mean a retrospective change post April 2016 (i.e. post the new 10(2) of the ITEPA), then I agree. At the very least, I think it's worth making this distinction. Post April-2016, it's the responsibility of the fee payer, end of story, and any attempt to claw this back, even with a contractual clause that might allow this in principle, is, in my opinion, likely to fail.
    I meant a change post April. I've heard some stories of clients now saying "we've looked at the situation and you're inside IR35 now, you always have been, and so we are going to take the PAYE and NICs that we haven't taken since April from you now".

    My belief is that in that situation, while the fee payer might try to recoup that tax, they would fall foul of the guidance from HMRC even though it references employer / employee. As ever, if there are useful test cases to take on to clarify the legislation for the benefit of contractors, there are groups out there willing and able to take that fight on.
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  3. #13

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    Quote Originally Posted by TheFaQQer View Post
    I meant a change post April.
    Thanks, then I agree. Liability rests with the fee payer. As an armchair lawyer, I donít think clauses that say differently would be enforceable, if they were tested, because there are terms implied by law / statute on where the liability falls. In general, they probably arenít drafted adequately either.

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