Agency has clause making my LtdCo liable for their tax/NIC - normal or not?

[DrStrange]

I've received a draft contract from my agency, and one thing that jumped out was a clause starting that, should HMRC send the agency any demands for tax/NIC in relation to my assignment, then my LtdCo will be accept liability.

I'm unsure if this has always been standard practice, or if they're preparing for any future demands following April 2020.

As I see it, I'll have enough issues of my own should Hector deem my contact inside IR35 without having to worry about the agency's problems as well...

I'd appreciate any thoughts on whether this is normal or not?

[Lance]

It’s not the agency making you liable for their tax. It’s the agency making sure that if you do a runner they don’t have to pay your tax.

[mudskipper]

I've received a draft contract from my agency, and one thing that jumped out was a clause starting that, should HMRC send the agency any demands for tax/NIC in relation to my assignment, then my LtdCo will be accept liability.

I'm unsure if this has always been standard practice, or if they're preparing for any future demands following April 2020.

As I see it, I'll have enough issues of my own should Hector deem my contact inside IR35 without having to worry about the agency's problems as well...

I'd appreciate any thoughts on whether this is normal or not?

Assuming this is private sector, then IR35 and the tax due is yourCo's responsibility, so yourCo has the liability.

Get the contract professionally reviewed, but from the limited information you've given, it doesn't sound like you're signing away anything that isn't already your responsibility.

[DrStrange]

Assuming this is private sector, then IR35 and the tax due is yourCo's responsibility, so yourCo has the liability.

Get the contract professionally reviewed, but from the limited information you've given, it doesn't sound like you're signing away anything that isn't already your responsibility.

It is private sector, and I understand (mostly!) MyCo's liabilities re tax if outside IR35.

I'm wondering though what could happen in the worst case scenario e.g. let's imagine the client decides in April 2020 that all their contracts are inside IR35. If HMRC then use that as evidence that existing contracts were also de-facto inside and then challenged my status for this year, and I was to subsequently lose at a tribunal, HMRC would be looking for PAYE/NIC from me on the "deemed salary".

They will also, presumably, go after the Agency for the Employers NIC, and it seems to me that this clause would permit the Agency to pass such a claim onto me. As such, I feel they'd be less likely to defend any claims and I should be pricing this risk in on top of my the PAYE/NIC from the "deemed salary".

I appreciate it's unlikely that I'll be challenged and, if I am, I'm confident the contract is outside, but I want to ensure I've properly priced/understood the risks.

I will be getting the contract reviewed through QDOS, but we're a couple of weeks away from that so just looking for others opinions on whether clauses such as this are normal, or are being introduced on the back of the reforms/loan charge.

Thanks

[Lance]

I'm wondering though what could happen in the worst case scenario e.g. let's imagine the client decides in April 2020 that all their contracts are inside IR35. If HMRC then use that as evidence that existing contracts were also de-facto inside and then challenged my status for this year, and I was to subsequently lose at a tribunal, HMRC would be looking for PAYE/NIC from me on the "deemed salary".

They will also, presumably, go after the Agency for the Employers NIC, and it seems to me that this clause would permit the Agency to pass such a claim onto me. As such, I feel they'd be less likely to defend any claims and I should be pricing this risk in on top of my the PAYE/NIC from the "deemed salary".

If you have incorrectly declared yourself as outside the employer's NIC is still the problem of your LTD. So the agency isn't really changing any responsibility. They've probably had some risk highlighted if your LTD. is bankrupt that HMRC could theoretically go after them and this clause mitigates that. Either way it's still not your problem. I personally wouldn't worry about the clause, bt do get a professional review.

If the client declares you as inside for April 2020 (if that legislation is done, which is not certain), then simply quit for the very reason that they are changing your Ts&Cs (assuming you are genuinely outside prior to that decision).