IR35 insurances required going forward?

[eek]

You mean cover for professional fees under investigation? I am pretty sure, yes, because it covers all types of investigation. Tax loss or claims related to contractual terms? Definitely no, and that has never been offered.

I think it's really simple, HMRC come calling asking a question - it's covered because it allows things to be killed off early - specialist handling initial inquiry, move on to easier prey.

Agency asking for £30,000 of the money they paid you 6 months ago because HMRC think it's inside, not covered.

Now in an ideal world IPSE or someone will be in a position to handle the first court cases regarding IR35 clawback clauses but I wouldn't want to be betting anything on it.

[Lance]

something to consider would be the federation of small businesses.
Join us | FSB, The Federation of Small Businesses


They provide legal cover for all sorts of stuff, including tax investigations.
But without the IR35 focus.

[Fred Bloggs]

I struggle to believe that in the real world a simple contract clause can definitively move statutory liability for IR35 issues from the agent onto the contractor. That's like saying if you get caught drinking and driving you can make a third party carry the consequences because you agreed they would if you got caught. I don't think it will stand up to legal scrutiny under contract law.

[malvolio]

...

Now in an ideal world IPSE or someone will be in a position to handle the first court cases regarding IR35 clawback clauses but I wouldn't want to be betting anything on it.

Why not? Arctic was such a case, and Jones wasn't even a member when that kicked off. They have always said they will pursue cases which are of wider benefit to all contractors and was the funds to do so. All they need is a case and a respondent willing to take it to court; someone trying to shift their legal tax liability down to an engaged worker is just such a case.

[ladymuck]

something to consider would be the federation of small businesses.
Join us | FSB, The Federation of Small Businesses


They provide legal cover for all sorts of stuff, including tax investigations.
But without the IR35 focus.

I seem to have made my way onto their mailing list and they've even called me a few times to encourage me to sign up. Wasn't entirely sure of the benefits TBH but maybe I should take another look.

[ladymuck]

I struggle to believe that in the real world a simple contract clause can definitively move statutory liability for IR35 issues from the agent onto the contractor. That's like saying if you get caught drinking and driving you can make a third party carry the consequences because you agreed they would if you got caught. I don't think it will stand up to legal scrutiny under contract law.

I'm inclined to agree but I'd also like to see it tested. In theory, you've signed a contract and so agree to that clause. Whether its enforceable would probably require it going to court for a ruling? I presume the legal team that put those clauses in place think they're enforceable or else why bother putting them there?

[malvolio]

I'm inclined to agree but I'd also like to see it tested. In theory, you've signed a contract and so agree to that clause. Whether its enforceable would probably require it going to court for a ruling? I presume the legal team that put those clauses in place think they're enforceable or else why bother putting them there?

A contract is overruled by law. Section 10 is definitely a law and definitely states the liability is on the hirer/fee payer if status is wrongly declared. A clause claiming to pass that liability on would be laughed out of court.

What might happen is the contractor may be chased for personal taxes now owed by a forced change of status, but that is not part of the contract, that would be merely the taxes not paid by treating income as outside IR35. Clearly the fee payer won't know how you have passed on YourCo income to yourself, so for example NIC savings via divvies would potentially be outstanding.

[jamesbrown]

I struggle to believe that in the real world a simple contract clause can definitively move statutory liability for IR35 issues from the agent onto the contractor. That's like saying if you get caught drinking and driving you can make a third party carry the consequences because you agreed they would if you got caught. I don't think it will stand up to legal scrutiny under contract law.

It absolutely cannot override statute, but I don't think these clauses are purporting to do that. In the first instance, the liability would absolutely fall on the Fee Payer, else someone else in the chain via the transfer of debt rules, so they would be paying it. However, these clauses are all "after the fact" claw backs on commercial terms so they don't attempt to override statute. Whether they hold is still highly debatable, though, and I suspect they mostly would not, but there is a chance they would.

[jamesbrown]

Oh, and also bear in mind that YourCo is jointly liable under any situations involving "fraud", which HMRC tend to abuse as a notion, but that is probably a longshot too - in 99.9% of cases, no contractor will have colluded with a wrongful determination.

[eek]

It absolutely cannot override statute, but I don't think these clauses are purporting to do that. In the first instance, the liability would absolutely fall on the Fee Payer, else someone else in the chain via the transfer of debt rules, so they would be paying it. However, these clauses are all "after the fact" claw backs on commercial terms so they don't attempt to override statute. Whether they hold is still highly debatable, though, and I suspect they mostly would not, but there is a chance they would.

The problem here is that there are 2 possible reasons why an agency may want such a clause

1) to claw back the money 1 year later after HMRC starts an investigation and the end client instantly folds and HMRC asks the agency for the money
2) the more annoying area where you start a contract and in month 3 the determination arrives saying you are inside and the agency needs to find a means of paying the first 2 months of tax. (yes I know it's wrong but just because the rules are stupid doesn't mean it's easily fixable).

And we don't know what the intent of the clause is for. However it is likely to be so widely written that it may cover either scenario