Agency will not permit dividend method of payment

[Not So Wise]

It would be a bit like the government asking UK companies not to do business with companies from a specific country (e.g. North Korea) - perfectly legal for the government to enforce that.

Actually not, especially as not only is Gib a UK protectorate it is also part of the Euopean Union in it's own right (which is why i had it there in first place instead of caribbean), thus IR using behind the curtains strong arm tactics instead of just passing a law which would have been shot down in the european courts

However, the bit of the chain that the IR objects to, in the case of divi payments, is something that is not directly related to any transactions involving the agency. The agency pays your company (or umbrella), who then subsequently (and independently of the agency) pays you. The agency has no visibility whatsoever in what happens to the money once it has left the agency's bank account. Hence surely it is not legal for them to enforce such a clause, since they have no legal visibility of the transactions involving money that they have paid out.

You are hiding behind "enforceable" again, uneforceable does not equal legal/illegal.

And you are missing the point, i seriously doubt the barrow boys down the agency care themselves if a contractor pays a penny in tax, hell they are probably trying to figure out ways themselves to advoid it. So why put something like this in? It's costing them contractors which is costing them money

Who is the one group who want you paying more tax? who can easyly see how you paid yourself? who wants you have another thing stacked against you if they claim you are inside IR35? Who has power to force agencys to do something that really is not to their benefit?

[swamp]

Pcg

This came up on the PCG message board a couple of months back:

"The client is seeking an explicit undertaking by the contractor to draw 95% of fees less expenses for the engagement as salary!

According to the agent, the reason given by [the client] is that they don't want hassle from HMRC, with questioning on the realities of engagements...."

[Rebecca Loos]

You are hiding behind "enforceable" again, uneforceable does not equal legal/illegal.

What is the point of a clause that cannot be enforced? Can you think of any other clause where enforcement is not possible?

And you are missing the point, i seriously doubt the barrow boys down the agency care themselves if a contractor pays a penny in tax, hell they are probably trying to figure out ways themselves to advoid it. So why put something like this in? It's costing them contractors which is costing them money

Who is the one group who want you paying more tax? who can easyly see how you paid yourself? who wants you have another thing stacked against you if they claim you are inside IR35? Who has power to force agencys to do something that really is not to their benefit?

Yes thank you, I understand that it is not at the agency's request that all this is happening. It is definitely the IR that has an interest in the matter.

As a principle anyway, I just can't see how it can be legal to have clauses like these. Agencies, under pressure from the IR, would only put clauses like these in a contract because they know that 90% of contractors will just grumble and accept them. But I am sure that with a good lawyer they could easily be declared void.

[simes]

Ok, just spoken with Filetravel and they have tried to reason, in writing, with Alexander Mann to the effect that it shouldn't concern them one jot that a contractor pays himself one way or the other.

This falls on deaf ears though and the MD of Filetravel has to sign a form saying that deemed employed is the method of payment, or no contract is entered into.

Computer People and Amicus are also doing this.

He said that if a contractor pays himself in this method, he can still apply to the IR at end tax year for a rebate if he wishes to challenge this payment, but the chances of this succeeding, based on signatures all round, are nil.

From my point of view, I have enough other things going on and methods of working to make most contracts I take as IR35 compliant. I would take this as a huge infringements of working practices so I will not be going through AM or the aforementioned agencies under any circumstances. If anyone wishes to speak to AM to get their point of view, I would be very interested.

[Not So Wise]

What is the point of a clause that cannot be enforced? Can you think of any other clause where enforcement is not possible?

What does it matter if the agency cannot enforce it, i don't think anyone cares if it is enforceable. What it does come down to is this
1: It will scare more people into paying up
2: If IR35 investigated not only do you run risk of getting huge tax bill agency now has easy get out cluase from contract and possible legal/financial come back against the contractor
3: And most importantly you try argueing to a judge that your "working practices" do not indicate emploment with a clause like that on your contract

If enforceability dictated laws or contract clause's the law books would be alot smaller and contracts would be a lot shorter. Cluase's are in there to protect the partys if there is any comeback and also so a party can back out or penalise the other if they do discover something they are not happy about. If the agency do not put the clause in there and then discover the contractor is paying themselves entirely in dividends there is nothing they can do, have it there and they have their options open.

the MD of Filetravel has to sign a form saying that deemed employed is the method of payment, or no contract is entered into.

Interesting term there, "deemed employed" by the agency. I wonder if you could turn around and get the benefits from the agency that temps are due (Paid holidays, sickness benefit so forth)

Not susprised comp people are doing it to, they are normally one of the first. Not sent a CV to them on principle in nearly 9 years,after i gave them a reference and the person received no less than different 5 sales calls from them in the same week.

Wish many more contractors black listed agencys that so quickly side with IR's demands (or even the clients), they would then either go out of buisness or quickly realise they if they want to remain in buisness they need side with contractors sometimes, sadly though to many people just put up with it.

[Rebecca Loos]

Well NSW I am glad you are not a lawmaker! The point of a legal system is in defining the laws and making sure they can be enforced. You seem to be locked on the idea that somehow the "agency has to enforce the law". No, business parties do not enforce laws, the justice system does, with the help of a law enforcement agency (!no pun intended).

My question wasn't: what is the point of a clause that the agency cannot enforce but "what is the point of a clause that is not enforceable from a business point of view and that the agency or whoever interested party cannot ask the justice system to enforce". This is not about agencies powers but about the very legality of putting a clause that has no relation to the business transaction described in the contract - unenforceable, not as in "the agency cannot force you to do this although they have a right to do so", but "the agency cannot force you to do this since they have no right to do so"

Your point 3. is actually the very point that would save you in court, incidentally. It has been the case, time and again, that unfair/unlawful clauses in contracts can be ignored and it has been successfully argued in court that a specific clause i a contract can be ignored in certain circumstances.

I think at the root of all this, you have forgotten that it is a business-to-business contract, rather than anything to do with employment. Your company submits an invoice to the agency, this goes from one business entity to another business entity. But maybe too many contractors these days have got an employee mentality and this explains that agencies/IR think they can intimidate contractors that way.

think about it this way: would you ask a plumber to sign a contract detailing you how he's going to pay himself? That would be ridiculous and the plumber would be perfectly entitled to sign your contract and then ignore that clause.

[threaded]

Rebecca Loos: Actually a contract is rather like making laws about how the parties to the contract will deal with each other.

[Rebecca Loos]

threaded: exactly. Hence the irrelevance of any clause that does not deal with the transaction between the 2 parties.

[tim123]

Sorry rebecca, I don't think your arguement is right.

A party to a contract can insert whatever clause it likes into the contract and if you agree to it, and it's legal, they can theoretically enforce it. There's no requirement for there to be any business justification.

Though it does seem to me that they can't enforce it practically. You take the dividends, they find out and sue, you wind up the company, no money.
And that's if they find out.

tim

[Rebecca Loos]

But Tim, is that always true? Isn't there in law the concept of a restrictive clause, that a party can disobey if either it places unfair restrictions on the party, or if the other business party would suffer no prejudice if it was breached?