My agent admitted that they have no ROS in their contract. Can I sue them?

[dude69]

After I received QDOS news about 2 guys lost their IR35 cases and both sounded perfectly as meself I called MD of my agency and asked to double check if agent-cleint contract has ROS (I have ROS between my ltd and the agent).

MD said - no they dont as the client would never sign that contract.

Seems like a year of my life is screwed.

The question is. In event HRMC would like to get some money back - how do they calculate unpaid tax (I currently pay about 38% from net earnings altogether including my personal tax return and very small epxeses - around 300 a month for the tube, phone and PC parts)? How much roughly I would pay if the thing will go to court and I lose the case (I have QDOS insurance though but they may argue I am not covered as agent's contract differs)?

The another question is - guy within the agency who managed my contract told me in email (which I believe still have) that agency have mirror copy of my contract with the client. Can I sue them for deception?

Cos they mislead me to believe that I was outside IR35.

Firstly, you should take legal advice on whether you or inside or outside IR35 when you sign the contract. HMRC are looking for evidence that you are not reckless as to you IR35 status. You are entitled to proceed on the basis of your reasonably held belief.

Secondly, the right of substitution was just one aspect of the recent case, I am not convinced it's an absolute rule, as you need to consider the entire working relationship. So it's rather fatalistic to determine now, mid-contract that you are no longer inside IR35. You are not really qualified to decide that in the eyes of the law, and legally you should probably proceed on the basis of your existing understanding (i.e. the legal advice you took).

Thirdly, and I have posted on this before here, I do not think the QDOS insurance is good value. As I understand it you are required to take minimum levels of salary about £10k/year, and the cost of the insurance on top of this. I believe the cost is about £2k/year? The cost of the insurance should not exceed the average risk. I do not think IR35 investigations are that likely, so the insurance is essentially a losing bet. I don't think this insurance has ever actually paid out, so it is very much a losing bet. In my experience as well, insurance companies like to avoid paying out for any reason they can find, they will screw you when it comes to claim time.

OTOH, legal investigation insurance is about £80/year, and seems better value.

By the time HMRC are crawling over you, you are in trouble anyway.

I am not sure why you are paying 38%, it seems very high. I guess your wife earns over the 40% allowance, so you cannot avoid tax by dividends to her.

My understanding is that the amount of money at risk is the retained funds in the company, not personal funds (liaiblity with your Ltd.). So paying out as much money as possible, winding up the company and distributing as Capital and taking a couple of months off will all reduce liability.

If you have say £30k in the company, it is not so much to risk, with what must be a sub 1% chance of investigation.

My suggestion is to chill out, go play with your guinea pig.

[Lewis]

they probably will remove the cover... wont they?

Not necessarily. They don't need to even see the contractor-agency contract to provide cover let alone the agency-client one, just the working arrangements are enough. So I would image you'd be ok.

But there is certainly no point paying the premiums for 4 years as if the cover is invalid you might as well know now and save yourself the premiums.

Unless you were planning on hiding completely from QDOS the fact that you know there is no substitution clause. A very risky strategy.

[Lewis]

My understanding is that the amount of money at risk is the retained funds in the company, not personal funds (liaiblity with your Ltd.).

That's also how I understand it. As investigations can go on for months. Would you be allowed to keep declaring dividends to clear out the account during investigation? If so, the chances are that the only money left is mostly set aside for corporation tax. So if you lose IR35 and pay what you can with that money, what happens when you then can't pay your corporation tax bill? Does the company just go bankrupt? Would that cause the directors any problems?

[dude69]

That's also how I understand it. As investigations can go on for months. Would you be allowed to keep declaring dividends to clear out the account during investigation?

No of course not.

The money is essentially frozen from the point they start investigating.

You would have to pay it back.

If they ask to see all your files, you then pay out all your retained cash th e next day, and then the investigation concludes that your company is dodgy, then you would be in quite a bit of trouble.

[Lewis]

If they ask to see all your files, you then pay out all your retained cash th e next day, and then the investigation concludes that your company is dodgy, then you would be in quite a bit of trouble.

I wasn't thinking quite so obvious but more continue to pay dividends at the same frequency as before (i.e. carry on as normal). Or are you not allowed to declare any for years whilst you are under investigation! It sounds so.

Presumably there's no point continuing to work for the company if there is a risk the money is just going to go to HMRC so what do people do? Stop working for a while or open a new Ltd to work through whilst the investigation goes on? I imagine HMRC wouldn't be too pleased with the new Ltd option either.

[Cheshire Cat]

woah, hang on, hang on!
The last few posts suggest that HMRC can only claim tax bill on money in the business account? So, if htey investigate and the SC determines they are owed £20,000 but there is only £5 in your account then you're unable to pay, but HMRC won't chase YOU personally? Is this correct? So, if you took out monthly dividends and left only CT in the business account then you can only pay HMRC from this balance?

This alters my (poor) understanding of HMRC powers, as I thought YOU would effectively be liable for personal tax as if the divvies were salary, hence it's irrelevant whether the money is in the business account, in your personal account, or long since spent on fast cars and hookers.

[Lewis]

woah, hang on, hang on!
The last few posts suggest that HMRC can only claim tax bill on money in the business account? So, if htey investigate and the SC determines they are owed £20,000 but there is only £5 in your account then you're unable to pay, but HMRC won't chase YOU personally? Is this correct?

Pretty much yes. I believe if they can prove you knew you were caught then they can chase you personally but it has never happened as far as I am aware. Having a contract review say you are outside I think is enough to protect you from being chased personally.

As I understand it, that was part of the reason the MSC legislation was introduced. Some MSCs were just closing down Ltds and reopening new ones the next day and contractors just moved on. HMRC got no IR35 money.

I should say I am only repeating what has been posted on here and places like Shout99 from people who seem to know a lot more than me.

[maxima]

Qdos insurance costs 355. I have salary of 12K. I dont have capital in the company at all. Not a penny. How I supposed to play with guineapig if I have a cat? Would you lend me one?

[TheFaQQer]

How I supposed to play with guineapig if I have a cat? Would you lend me one?

I honestly haven't got a clue what you are on about now.

[maxima]

My suggestion is to chill out, go play with your guinea pig.

Me neither !