IR35 Liability transfer

[eek]

this is a good point, and I have seen it used for permies....

But for an outside contractor, who was never an employee, trying to apply employee rules AFTER they have left, seems far fetched and I doubt it would get through court.
IANAL

What has a court to do with it. Agency sends £20,000 to HMRC in NI payments against your name and NI number.

exactly who are you going to take to court and why?

[Lance]

What has a court to do with it. Agency sends £20,000 to HMRC in NI payments against your name and NI number.

exactly who are you going to take to court and why?

where is the agency going to magic £20k from?
This scenario is for a contractor who is no longer working for this client.

[jamesbrown]

this is a good point, and I have seen it used for permies....

But for an outside contractor, who was never an employee, trying to apply employee rules AFTER they have left, seems far fetched and I doubt it would get through court.
IANAL

The question is not about the contractual relationship (afterall, there is no contractual relationship between the client and the individual), but whether there is a PAYE debt and who should pay it (and, of course, who HMRC thinks should pay it). I wouldn't call it far fetched, I would call it uncertain.

[Fred Bloggs]

The commercial terms can be drafted in a way that doesn't seek to override any particular legislation, but I agree that this is a tricky route for a Fee Payer. The first difficulty for the Fee Payer is that they must have already incurred the tax loss, i.e., paid all taxes owed, and they will definitely not be able to recover any ErNI through this route. However, at this point, everyone's a loser. You fight HMRC and it probably costs you more in legal fees than the debts owed or you accept the situation and seek to recover as much as you can. Just bear in mind that there are legitimate legal opinions either way on this issue, assuming well drafted clauses and a roughly equal balance of power between the parties who acted in good faith. Courts generally don't like to set aside terms agreed under these circumstances, but it's also clear that commercial terms cannot override legislation. Naturally, if the contractor supplied any incorrect information that contributed to the SDS decision, they would be in trouble.

Oh I don't doubt for a second you're right.

The revised IR35 legislation and the usurious taxation of one band limited companies seems to have finally killed some sectors of the industry completely. I haven't worked in the UK since 2014 when the energy industry started on it's race to the bottom.

It's so bad now that for the first time in a decade there has been a contract available in my skillset and just about every agency in the country has called me trying to fill it. There isn't anyone still in the industry who will take an inside IR35 contract.

Then there's a bunch of people like me who won't take an outside contract either because I only get to keep 40p out of every £1 invoiced. The government finally seem to achieved what they have been trying for over 20 years. And as a result the entire economy has suffered reduced tax take.

[eek]

where is the agency going to magic £20k from?
This scenario is for a contractor who is no longer working for this client.

Fee payer is presented with the bill for an assignment that HMRC regards as inside. It fails to recover the money from the contractor (reasons unknown).

Now the fee payer has 2 options here - it pays all the money it needs to HMRC (including a shed load of NI on the income tax is needs to pay) or it treats the NI part and leaves the income tax part to the contractor.

So the question isn't where does the agency magic the £20k from. It's why would the agency pay £60k to settle all the bill when they can pay £20k and leave the awkward contractor a problem to deal with.

[jamesbrown]

So the question isn't where does the agency magic the £20k from. It's why would the agency pay £60k to settle all the bill when they can pay £20k and leave the awkward contractor a problem to deal with.

Especially if HMRC agrees with this approach (as they seemingly do).

[Lance]

Fee payer is presented with the bill for an assignment that HMRC regards as inside. It fails to recover the money from the contractor (reasons unknown).

Now the fee payer has 2 options here - it pays all the money it needs to HMRC (including a shed load of NI on the income tax is needs to pay) or it treats the NI part and leaves the income tax part to the contractor.

So the question isn't where does the agency magic the £20k from. It's why would the agency pay £60k to settle all the bill when they can pay £20k and leave the awkward contractor a problem to deal with.

ouch....

Although if the agency has a few of these could they afford to anyway? Their margins seem huge to us, but after agents wages, factoring fees, and other costs they can't afford to do this for many contractors before they go bust (willing or unwilling).

[jamesbrown]

Although if the agency has a few of these could they afford to anyway?

Probably not, but they certainly cannot afford not to and, either way, there's the outstanding PAYE debt and no companies will be allowed to close until it's resolved.

[eek]

Probably not, but they certainly cannot afford not to and, either way, there's the outstanding PAYE debt and no companies will be allowed to close until it's resolved.

Remember that the only example of this we have seen (heck anyone has seen) is from AMS who are a billion pound firm.

Now a few outside IR35 determinations won't destroy them but would be rather expensive which is why I suspect they pulled the tricks I covered above.

[GoForIT]

If a ltd co 1 man works via an intermediary for a large end client and has an indemnity clause re taxes etc that is quite open. Is one option here to close the company each few years so there is no company for the intermediary to claim from? Thinking especially when working for a few years at the same client