Comprehensive update that. Very useful feedback. Cheers.
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IR35 Insurance
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FWIW I do a lot of work with a particular consultancy that has an "associate" model. They mandate all contractors working their outside IR35 gigs hold the same Kingsbridge insurance. I know the owners of the firm very well and made my views known to them that it really shouldn't be my place to insure the supply chain. The wishy-washy response was that it was a requirement set by the end client(s) as part of agreeing to structure the work as outside IR35.
My approach was to let my principles slip for once, and factor it into the day rate of course.
I guess I can see the sales pitch:
1. Client benefits with lower cost of outside IR35 engagement.
2. Contractor gets what they want.
3. Client mitigates risk with insurance policy paid for by the contractor.
4. Contractor sucks up the insurance cost.
5. Agency gets a nice little kick back for each policy sold.
Likewise there is nothing in my contract to pass liability over to me/my Ltd.
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Originally posted by Crossroads View PostFWIW I do a lot of work with a particular consultancy that has an "associate" model. They mandate all contractors working their outside IR35 gigs hold the same Kingsbridge insurance. I know the owners of the firm very well and made my views known to them that it really shouldn't be my place to insure the supply chain. The wishy-washy response was that it was a requirement set by the end client(s) as part of agreeing to structure the work as outside IR35.
My approach was to let my principles slip for once, and factor it into the day rate of course.
I guess I can see the sales pitch:
1. Client benefits with lower cost of outside IR35 engagement.
2. Contractor gets what they want.
3. Client mitigates risk with insurance policy paid for by the contractor.
4. Contractor sucks up the insurance cost.
5. Agency gets a nice little kick back for each policy sold.
Likewise there is nothing in my contract to pass liability over to me/my Ltd.
This is all to be tested of course but thanks to HMRC's usual sloppy wording of their legislation, it is currently far from clear how it al works.Blog? What blog...?Comment
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Originally posted by malvolio View Post
it is currently far from clear how it al works.
their advice is actually simple, do what you can to recover the money from the contractor and then repay it as deemed payments with the tax deducted because otherwise you need to pay tax on the full amount the contractor received.
so a £500 a day contract for 200 days is £100,000. recover the money from the contractor and £45,000 goes to HMRC and you return the £55,000 as a deemed payment to the worker.
fail to recover the money and that £100,000 is deemed to be the deemed payment net of tax and the chain will need to find the £95,000 or so that HMRC believes is owed in tax.
now the chapter 10 law is a mess because it results in 2 possible outcomes but it should be very clear why 1 particular approach is the one everyone (except the contractor) in the chain prefers.
and it’s why all the sane large clients operate on the basis of that they will only use umbrella workers - wtf would you take the risk unless you had an exception that pushed the decision into the chapter 8 rules.
edit to add - and I think if you follow the logic above you can see why kingsbridge are getting the contractor to pay the insurance..Last edited by eek; 2 April 2023, 14:37.merely at clientco for the entertainmentComment
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Originally posted by eek View Post
and it’s why all the sane large clients operate on the basis of that they will only use umbrella workers - wtf would you take the risk unless you had an exception that pushed the decision into the chapter 8 rules.
edit to add - and I think if you follow the logic above you can see why kingsbridge are getting the contractor to pay the insurance..
I still don't get why the Contractor should buy the insurance (noting that the contractor's only other option may be to walk away).
Even if the fee for this is deducted from the Agent's payment to the contractor, it's surely better that the Agent buys the insurance and the contractor doesn't get involved. After all, the contractor has no Ch.10 liability once an 'outside' determination is in effect ratified by the first payment made by the client.
If the contractor buys the insurance then presumably dealings between the supply chain and the insurer need to be handled by the contractor. Seems to me that this lines up a lot of potential admin and involvement in something that's nothing to do with a contractor. Even worse, the contractor doesn't get paid for any of this admin.
Or perhaps the insurance allows the contractor to walk away and leave the supply chain entities and insurer to deal with each other?Last edited by Protagoras; 2 April 2023, 17:26.Comment
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Originally posted by Protagoras View PostAfter all, the contractor has no Ch.10 liability once an 'outside' determination is in effect ratified by the first payment made by the client.
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And as I hinted, there is a fundamental problem here, that you can't insure against someone else's risk, unless you specifically and contractually agree to do so - and even then the insurers may take a dim view of it.
On the face of it Eek's description of the intended process has a certain logic to it, but they can't impose it in isolation. HMRC may well have their view of the reality; they've had lots of practice...
Furthermore, does the insurance pay out for the "recovered " monies, or the legal support to stop it being clawed back?Blog? What blog...?Comment
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Originally posted by malvolio View PostAnd as I hinted, there is a fundamental problem here, that you can't insure against someone else's risk, unless you specifically and contractually agree to do so - and even then the insurers may take a dim view of it.
On the face of it Eek's description of the intended process has a certain logic to it, but they can't impose it in isolation. HMRC may well have their view of the reality; they've had lots of practice...
Furthermore, does the insurance pay out for the "recovered " monies, or the legal support to stop it being clawed back?Comment
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Originally posted by jamesbrown View PostAll you can really do is avoid Chapter 10 contracts altogether or, at the very least, ensure that the contractual terms do not allow for any transfer of liability, and even that might not be enough (which is why I avoid them altogether).
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Bit slow here and just checking, but main way your not engaging under ch.10 is either contracting to small business clients (under the £10.2M) or overseas work right?Comment
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