New Clause in a contract that I have never seen before

[bobspud]

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?

[northernladuk]

Only seems a problem if you are actually doing it. If you are not what is the problem?

Just clients covering their own backs and keep their own offshore/loan business off the radar.

The only bit that maybe of concern is the bit about HMRC coming sniffing. Sniffing in relation to this clause or anything at all? I wouldn't expect to get terminated while defending myself against an IR35 investigation for example.

[SimonMac]

I am not sure how legal this would be, its not the clients place to say how your company spends its money!

[bobspud]

Only seems a problem if you are actually doing it. If you are not what is the problem?

Just clients covering their own backs and keep their own offshore/loan business off the radar.

The only bit that maybe of concern is the bit about HMRC coming sniffing. Sniffing in relation to this clause or anything at all? I wouldn't expect to get terminated while defending myself against an IR35 investigation for example.

Have always been a UK Ltd However it's the last sentence that concerns me. Does IR35 investigation constitute a situation avoidance of tax or scheme...

[Clare@InTouch]

I've seen similar clauses before, they seem to be more common as times goes on.

[northernladuk]

Have always been a UK Ltd However it's the last sentence that concerns me. Does IR35 investigation constitute a situation avoidance of tax or scheme...

Of course it does. You are avoiding paying taxes by claiming a wrong IR35 situation. The devil is in the wording of the bit you didn't post though.

[cojak]

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?

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

[bobspud]

Of course it does. You are avoiding paying taxes by claiming a wrong IR35 situation. The devil is in the wording of the bit you didn't post though.

The contract is very hard on the side of not caught by IR35

No MOO
Right to determine my own working practices and place of work
The right to substitute part or all of my work
The demand that I provide my own tools and software
The require to put my own work right free of charge
No working hours in the schedule

So that bit keeps me quite happy.

the other clause is :

2.4 XX shall have the right to terminate this Agreement for breach forthwith, without liability or cost, in the event that:
2.4.1 the Contractor is at any time in breach of Clause 4.6; or
2.4.2 Capita has good reason to believe that the Contractor is, or will, in future, be in breach of Clause 4.6; or
2.4.3 any competent authority (including, without limitation, Her Majesty’s Revenue and Customs) instigates any investigation or brings any charges against the Contractor in relation to the use of a scheme of the type identified in Clause 4.6; or
2.4.4 the Contractor is in breach of any warranty or undertaking contained in this Agreement at any time.

[Old Greg]

We all know they contracts can in effect be terminated without notice so I don't see that it's worth worrying about.

Interesting, though.

[Gentile]

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?

Agree to sign it, provided there's a reciprocal clause that states you'll be paid immediately and in full for the entire term of the contract if anyone they engage gets investigated for using such a scheme. When they tell you they can't possibly guarantee the tax affairs of any and all the contractors and sub-contractors they use, tell them you sympathise and that's why you also can't provide that type of guarantee for everyone and anyone whose services you may engage. I'd never agree to sign a contract that asks my Ltd to guarantee a third party's behaviour.