IR35 Liability transfer

[Keanu2020]

I’ve seen this come up a bit in threads on here, and originally it seemed to be that end clients or middlemen trying to add contractual clauses to indemnify themselves where you are liable for all tax costs that might arise had no chance. Now the thinking seems to have shifted a bit and the current view would seem to be that in fact these might be enforceable. Is that fair?

Background – Seen 8 or 9, lets call them ‘remote working platforms’ grow over last few years. I’ve signed up to most, more out of curiosity and never taken contracts. If I was being generous, I would say most look like a community, with MSA and call offs, if I was being harsh, it’s a closed pre-vetted job board with recruitment agents sales team placing people.

What is pretty much constant is all the advertised roles are listed as outside, yet the contract, such as the MSA, always has the liability transfer clause. Hence never taking a role. Back of my mind goes no incentive for either end client or platform owner to properly review each role and make determination and no real risk if tax liability is passed to you. Do others see it this way?

[alphadog]

If the number of replies to posts on this forum is anything to go by, the number of outside IR35 contractors has taken a tumble. Either that or they've found some other forum to discuss these things elsewhere?

I'm not a lawyer, but I would guess that any contract that attempts to reverse the outside IR35 rules would ultimately be doomed to fail.

[Lance]

I don't think it would be enforceable to transfer the liability as the liability is set in legislation.

However an indemnification clause isn't attempting to transfer liability per se. It is trying to make the contractors LTD financially responsible to recompense the agency. Is that enforceable? Depends on the wording.
Of course if in a contract both parties are agreeing to it.

The next question is whether that is enforceable... I wouldn't want to be arguing that position in court if I'd agreed to it.

The reality is that it's in everyones' interest for it stay well outside IR35. So stick to good working practises either way.

[Keanu2020]

I haven't signed a contract to date with the clause, and most refuse to remove it, so it’s a case of walking. You make a really good point though if you sign the contract and it’s in there, hard to argue later it does not count. Can see a pretty dim view of that position being taken (No one would just ignore other parts of a contract you signed).

I’m not sure it is in everyone interest either. I don’t mean to speak ill of recruitment agencies, but I don’t have any confidence that they care if they can place someone. If they insert the clause and pass risk to you, just to they can land you ‘outside’ what do they care. Your risk.

I think some of these remote working platforms are just doing this at scale though, as every role is outside and the market is just not like that anymore, which make me think they are pretty confident of the transfer provisions.

[eek]

I think some of these remote working platforms are just doing this at scale though, as every role is outside and the market is just not like that anymore, which make me think they are pretty confident of the transfer provisions.

I wouldn't bet on that.

The reality is that the clauses haven't been used in anger yet and until they are it's hard to know how things will play out.

But my concern about the clause isn't so much the clause it's the clause attached to the likelihood that HMRC find 1 person inside and suddenly all 300 other contractors are inside and see the claw back clause triggered.

[Lance]

I haven't signed a contract to date with the clause, and most refuse to remove it, so it’s a case of walking. You make a really good point though if you sign the contract and it’s in there, hard to argue later it does not count. Can see a pretty dim view of that position being taken (No one would just ignore other parts of a contract you signed).

I’m not sure it is in everyone interest either. I don’t mean to speak ill of recruitment agencies, but I don’t have any confidence that they care if they can place someone. If they insert the clause and pass risk to you, just to they can land you ‘outside’ what do they care. Your risk.

I think some of these remote working platforms are just doing this at scale though, as every role is outside and the market is just not like that anymore, which make me think they are pretty confident of the transfer provisions.

They would still have to have the fight to get the money. Which will cost them.
And they will also be having a fight with the client. Which risks their position as a supplier.

There is nobody who doesn't get hurt except HMRC.

[Keanu2020]

But my concern about the clause isn't so much the clause it's the clause attached to the likelihood that HMRC find 1 person inside and suddenly all 300 other contractors are inside and see the claw back clause triggered.

100% on the same page, it will be like a gold mine for them. I even wonder if they are letting these things build up like a honey trap to make their lives easier. Also, think you might be surprised at the scale of some of these already (almost 10K people in one, 500 to 600 contracts currently running).

[Lance]

100% on the same page, it will be like a gold mine for them. I even wonder if they are letting these things build up like a honey trap to make their lives easier. Also, think you might be surprised at the scale of some of these already (almost 10K people in one, 500 to 600 contracts currently running).

not quite sure it will be a gold mine.

First HMRC have to prove that they should have been inside.
The client will fight this very hard... They may think they have indemnity in their back pocket but that's only as good as the supply chain. What if there are agencies in that supply chain that no longer exist?
What if the agencies cannot afford to lose that money so go bankrupt immediately?
What of the contractors have MVLed? How are the agencies going to pursue that?

And in all this mess, HMRC only have the client to go after.
So not a gold mine, but a total nightmare of court rulings, tribunals, test cases.

HMRC pursue one client, who will have multiple agencies to chase, who will have hundreds or thousands of sub-agencies and contractor LTDs.


All all this ^^^^^^ is why clients are just dodging it in many cases by simply getting inside contractors.
The indemnity clauses are not going to fix this for anyone.

[Protagoras]

not quite sure it will be a gold mine.

Goldmine for lawyers!

[Lance]

Goldmine for lawyers!

indeed. Isn't everything?