New Clause in a contract that I have never seen before

[BolshieBastard]

Hi,
So folks I have the offer of a new role and this clause is sat right in the middle of the contract.

The Contractor shall ensure, throughout the term, that neither it nor any of its affiliates or any subcontractors, employees or persons to whom the contractor make payment in relation to the services has in place any arrangement involving the use of any scheme to avoid UK tax by diverting income of a UK resident individual to a non- UK resident company, partnership or trust of the payments made under this Agreement, or on any transaction connected with, or resulting from, this Agreement or the services. This clause shall apply where liability for a UK tax and National Insurance Contributions would exist were the UK resident person to be employed directly by XX / Client and whether or not the Contractor is based in the UK.

There is a sub clause that says as soon as anyone like HMRC start asking questions the agency/client will terminate the contract with immediate effect. so now it seems that hector snuffling around will not only get accountancy fees but could lose you your engagement as well...

What think ye?

Seems far reaching to me especially "the use of any scheme to avoid UK tax by diverting income of a UK resident individual to a non- UK resident company, partnership or trust of the payments made under this Agreement, or on any transaction connected with, or resulting from, this Agreement or the services. This clause shall apply where liability for a UK tax and National Insurance Contributions would exist were the UK resident person to be employed directly by XX / Client and whether or not the Contractor is based in the UK."


This doesnt just seem to be about off shore scheme but any tax avoiding measure. It even states your tax position should be as if they employed you and not as a contractor. In other words, if you take you money as dividends, you arent meeting your tax obligation the same as if they employed you.

I'd want the whole clause out since its up to me how I arrange my co's \ my tax affairs. If the client doesnt like the idea of me doing what I want to do, then fine, just dont expect to be working with you.

I'd walk away from this myself if they didnt remove it. Wouldnt surprise me if we start seeing this more frequently though.

Is this a public sector client?

[FarmerPalmer]

This clause shall apply where liability for a UK tax and National Insurance Contributions would exist were the UK resident person to be employed directly by XX / Client and whether or not the Contractor is based in the UK.

To me this seems to imply that the contractor is using a company as a sham to reduce tax liability and that the sub contracted company is not a business in its own right, and in fact you would normally be an employee of the client.

My gut feeling is don't touch with a barge pole.

[bobspud]

Seems far reaching to me especially "the use of any scheme to avoid UK tax by diverting income of a UK resident individual to a non- UK resident company, partnership or trust of the payments made under this Agreement, or on any transaction connected with, or resulting from, this Agreement or the services. This clause shall apply where liability for a UK tax and National Insurance Contributions would exist were the UK resident person to be employed directly by XX / Client and whether or not the Contractor is based in the UK."


This doesnt just seem to be about off shore scheme but any tax avoiding measure. It even states your tax position should be as if they employed you and not as a contractor. In other words, if you take you money as dividends, you arent meeting your tax obligation the same as if they employed you.

I'd want the whole clause out since its up to me how I arrange my co's \ my tax affairs. If the client doesnt like the idea of me doing what I want to do, then fine, just dont expect to be working with you.

I'd walk away from this myself if they didnt remove it. Wouldnt surprise me if we start seeing this more frequently though.

Is this a public sector client?

Not directly.

Actually the agent seemed to view a LTD company as a Pukka method of working and worded the rest of the contract extremely well to ensure it provided a framework for the consultancy that was outside of IR35 duress. Why bother allowing "sham" clauses such as MOO or substitution if the aim is to pin the consultant into the VERY position they would allow them to avoid?

The agency frowned upon the use of any Umbrella co's. I will be gaining written clarification in the morning and will report back.

My thoughts were that LTD co's are not Schemes. They are Legal entities that carry out business in their own right. IoM was a scheme. K2 is also a Scheme. A LTD company operating outside IR35 has every opportunity to apportion dividends legally within the law of the land...

Worth noting that the agent in question actually has an office in Jersey that turns out over 2.2million in profits on 7 million turnover working in the tax planning field... One law eh?

[BolshieBastard]

Not directly.

Actually the agent seemed to view a LTD company as a Pukka method of working and worded the rest of the contract extremely well to ensure it provided a framework for the consultancy that was outside of IR35 duress. Why bother allowing "sham" clauses such as MOO or substitution if the aim is to pin the consultant into the VERY position they would allow them to avoid?

The agency frowned upon the use of any Umbrella co's. I will be gaining written clarification in the morning and will report back.

My thoughts were that LTD co's are not Schemes. They are Legal entities that carry out business in their own right. IoM was a scheme. K2 is also a Scheme. A LTD company operating outside IR35 has every opportunity to apportion dividends legally within the law of the land...

Worth noting that the agent in question actually has an office in Jersey that turns out over 2.2million in profits on 7 million turnover working in the tax planning field... One law eh?

If I were you, I'd get this contract reviewed by B&C pronto if you decide you want this role.

Ltd's are not schemes but, it appears to me this particular client (not agent) wants to make sure the contractor pays tax and NI as if they were an employee. What is the point of taking a contract like that!?

Just my humble opinion though.

[malvolio]

Ouch - something that I think Mal should see...

Noted. However, since it's Capita, who are probably the most inept bunch of cowboys pretending to be an in-house recruitment team I've ever met*, I shouldn't worry about it; that clause would fail any test of reasonableness on the basis that having an investigation into your affairs does not mean you are doing anything wrong. Let's face it, 99.7% of all IR35 cases have not resulted in the contractor being caught. Also note that tax affairs are strictly confidential (about the only rule HMRC follow slavishly) so how would anyone know?

The rest of it is a cack-handed attempt to isolate themselves from any accusations of promoting "aggressive tax avoidance", whatever that is. Since they don't control where YourCo sends its money, how can that work? Ah yes, they only pay companies registered in the UK of whom the contractor is a shareholder, which takes around 3 minutes and £15 to prove. nd can easily be made a condition of trade.

You really have to worry about the competence of the owners of this £26bn a year recruitment business, don't you.



*Take a look at "Back in the old routine" in the blog. That was them...

[bobspud]

Noted. However, since it's Capita, who are probably the most inept bunch of cowboys pretending to be an in-house recruitment team I've ever met*, I shouldn't worry about it; that clause would fail any test of reasonableness on the basis that having an investigation into your affairs does not mean you are doing anything wrong. Let's face it, 99.7% of all IR35 cases have not resulted in the contractor being caught. Also note that tax affairs are strictly confidential (about the only rule HMRC follow slavishly) so how would anyone know?

The rest of it is a cack-handed attempt to isolate themselves from any accusations of promoting "aggressive tax avoidance", whatever that is. Since they don't control where YourCo sends its money, how can that work? Ah yes, they only pay companies registered in the UK of whom the contractor is a shareholder, which takes around 3 minutes and £15 to prove. nd can easily be made a condition of trade.

You really have to worry about the competence of the owners of this £26bn a year recruitment business, don't you.



*Take a look at "Back in the old routine" in the blog. That was them...

Apparently I need to spread some rep around before giving you anymore.

Nailed them in one...

I was not going to inflame the negotiation process by naming said group but there you are. I sent them a request for clarification last night along with a regulatory link to their Offshore (Jersey based) wealth management arm. They made 2 million in 2011 advising on and pursuing tax advantageous schemes for wealthy UK individuals and Companies

I have no problem with them asking me not to pursue an egregious scheme that is based on betting on the result of two flies walking up a wall and a failed crop in Nigeria that resulted in a loss that I never invested in, but legally entitled me to reduce my tax bill because XYZ company have better legal teams than the treasury and drove a bus through their legislation.

However If I am to be engaged as a private service provider that is not an employee and gains none of the advantages of being one, then I will be free to engage in studiously complying with the UK law on taxation and will pay my tax bills accordingly.

I hit the bench on Friday, by the close of play yesterday, I had 2 job offers... I also had a confirmation that a 3rd client had really liked me and was awaiting a project kick off to engage me. I also had 3 more enquiries in the afternoon. So I am not at all fussed if I have to walk away from them if they don't clarify or remove the clause.

Thanks all

[bracken]

Private or public?

I can't work out whether this is private or public sector...relevant to me as I'm working for HMG via capita (and therefore one of the 2500 under supposed investigation for tax avoidance) and my contract's up very soon. They're saying they want to renew me but I've not received any contract paperwork. I'm weighing up whether to continue working from next week 'at risk' (I'm on hols for two weeks after that) but this clause would concern me if they put it in at renewal...

[bobspud]

I can't work out whether this is private or public sector...relevant to me as I'm working for HMG via capita (and therefore one of the 2500 under supposed investigation for tax avoidance) and my contract's up very soon. They're saying they want to renew me but I've not received any contract paperwork. I'm weighing up whether to continue working from next week 'at risk' (I'm on hols for two weeks after that) but this clause would concern me if they put it in at renewal...

Its public.

I am talking to them this morning. I have put in a contract change request to see what they will do. I am with Mal on this in that the clause sucks. I can see why they are doing it but it needs better refinement. I have another couple of options open at the moment so If I though that this contract would fall into the band that would get me HMRC attention then I will take one of those instead...

[bobspud]

I have now had a response out of Capita and the omens appear ominous.

I had asked for clarification of the clause and to understand how far tax avoidance scheme reaches.

They have stated that they will not remove the clause. as it is there to protect them from contractors using offshore schemes (yawn) I, in turn have told the agent that I will be taking representation to review the contract in the whole, and that I have other offers on the table...

Capita are stating that this is to protect them from offshore tax schemes and money laundering. However I am very nervous of holding a contract that basically states that I will be held liable for paying myself as an employee, while stating that I am not one for the purpose of employment rights and protections, and that they will terminiate the contract as soon as HMRC come sniffing about.

Sad as usual its the client that will lose out in this...

[Old Greg]

I have now had a response out of Capita and the omens appear ominous.

I had asked for clarification of the clause and to understand how far tax avoidance scheme reaches.

They have stated that they will not remove the clause. as it is there to protect them from contractors using offshore schemes (yawn) I, in turn have told the agent that I will be taking representation to review the contract in the whole, and that I have other offers on the table...

Capita are stating that this is to protect them from offshore tax schemes and money laundering. However I am very nervous of holding a contract that basically states that I will be held liable for paying myself as an employee, while stating that I am not one for the purpose of employment rights and protections, and that they will terminiate the contract as soon as HMRC come sniffing about.

Sad as usual its the client that will lose out in this...

What do you think might happen if you sign?