Contract Indemnity Clauses (IR35?)

[suggy1982]

I've just received a new contract through an agency and it contains a number of clauses asking me to provide indemnify to the agency/end client against taxes, costs and damages for what appears to be related to IR35. (see below).

I was just wondering if these are common place now?

The Supplier confirms and shall procure that the Contractor confirms, they have read and acknowledged the information on the HMRC website 404 - Not Found and the Supplier and the Contractor will be fully responsible for any and all subsequent consequences. The Supplier and the Contractor take full responsibility and liability for all and any tax and NIC contributions payable by law in the United Kingdom or the local equivalent in the country where the Contractor shall be working. The Supplier and the Contractor fully indemnify and hold the Company and the Company’s Client harmless from any and all claims that may arise through noncompliance of payment, especially with regards to section 61B Income Tax (Earnings and Pensions) Act 2003 (“ITEPA”). Furthermore, the Supplier and the Contractor will fully indemnify and hold the Company and the Company’s Client harmless from all and any fee that may occur in regards to any claim made by any department of the government in respect of Third Party Debt Transfer.

The Supplier shall indemnify the Company and keep indemnified the Company for any failure to comply with this clause and ITEPA against all costs, charges, claims, actions, awards, expenses, damages, demand, penalties, fines, proceedings, liabilities, judgements or losses incurred or suffered by the Company. This indemnity shall not be subject to any cap on liability within this Agreement.

any losses incurred or suffered by the Company arising out of or in connection with the Contractor claiming to be an employee or worker of the Company (or, as the case may be, the Client) or otherwise entitled to any rights or benefits that employees or workers enjoy

any losses incurred or suffered by the Company arising out of or in connection with an official, public body or authority for any purposed regarding the Contractor as an employee or worker of the Company (or, as the case may be, the Client) or otherwise entitled to any rights or benefits that employees or workers enjoy including, without limitation, any claims by the Contractor under AWR

[Lance]

reads like they want you to make sure you pay your taxes and don't try and screw them over for employment rights.
Seems perfectly reasonable to me.

If in doubt get it reviewed by a professional.

[Really Not Real]

It's business, but not as we know it..

I've just received a new contract through an agency and it contains a number of clauses asking me to provide indemnify to the agency/end client against taxes, costs and damages for what appears to be related to IR35. (see below).

I was just wondering if these are common place now?

I had the same situation, in fact if my memory serves the wording is exactly what I was faced with (and by that inference I could probably guess the Agency), and it took over a week dealing with the Agency's MD and threatening to walk to get them to back down. The clause/s effectively transfer all risk/liability for unpaid tax & NI's to you, without defined limits in terms of the amounts you are exposed to or the time period you are exposed. Effectively you are personally liable until the day you die!

The Agency are attempting to remove the protections you get from operating through a Limited (liability) Company and for me that's fundamentally wrong.

If you want any further help PM me directly.

[CheeseSlice]

I don't think the contract is written very well.

"The Supplier and the Contractor fully indemnify and hold the Company and the Company’s Client harmless from any and all claims that may arise through noncompliance of payment"

Who is the agreement between? Who signs and in what capacity?

If its a contract between your LTD and the Agency, then how can it form an agreement of personal liability, as the LTD doesn't act on your behalf ?

I'd get some legal advice. I wouldn't sign this personally.

edit: after reading previous post, I agree that removing the section entirely would be better

[Carefullyintothefray]

I've just received a new contract through an agency and it contains a number of clauses asking me to provide indemnify to the agency/end client against taxes, costs and damages for what appears to be related to IR35. (see below).

How did you end up resolving this? I've just been sent a contract that has very very similar clauses. I wonder if it's the same agency.

[Dark Black]

I'm increasingly seeing similar clauses in contracts for roles purporting to be "Outside IR35".

I've discussed this with QDOS and their opinion is that:

The clause goes against legislation as it clearly outlines that the fee payer is the liable party for any periods after 2021 where the client is medium or large sized. Unfortunately the policy does not cover it as risk shifting is a legal matter not a direct result from HMRC. We do not believe the clause would stand up in the event of of a tax tribunal as it is clearly set out in legislation the fee payer is the liable party. We would advise the clause be removed from the contract but given the legal nature of the risk shifting clause it is not something we would re write and would simply suggest be removed

I've just walked away from signing a new contract because the client refused to remove the clause and I wasn't prepared to potentially become a legal test case.

Given the fact that (certainly in the case of the QDOS offering) IR35 insurance wouldn't cover it (and I pressed ODOS on this given their response above) I would advise being very wary of signing anything with a clause that attempted to pass tax liabilities back to the contractor/contractor's ltd co.

It seems some clients are playing games now, trying to engage contractors with contracts claiming to be "Outside" whilst attempting to pass tax liabilities back.

For the record, the "Outside" contract I've just walked away from, was a thinly disguised "Inside" role which was ripped apart when I had it reviewed (not by QDOS this time) for both IR35 and commercial terms.

Stay alert out there.

[jamesbrown]

Perhaps, but that QDOS view is a bit of a cartoon caricature of the real situation.

For example, here is a considered opinion to the contrary (mainly towards the end):

https://www.pumptax.com/wp-content/u...d-Yates-QC.pdf

Anyway, I think you're absolutely right to steer well clear of any such contracts and clauses.

[eek]

Perhaps, but that QDOS view is a bit of a cartoon caricature of the real situation.

For example, here is a considered opinion to the contrary (mainly towards the end):

https://www.pumptax.com/wp-content/u...d-Yates-QC.pdf

Anyway, I think you're absolutely right to steer well clear of any such contracts and clauses.

Reclaiming money from the contract when HMRC decides the contract is inside IR35 is very much a court case waiting to happen.

I suspect most contractors will just end up settling the bill or hoping the IPSE are both interested and have suitable funds to fight the case.

[Dark Black]

Perhaps, but that QDOS view is a bit of a cartoon caricature of the real situation.

For example, here is a considered opinion to the contrary (mainly towards the end):

https://www.pumptax.com/wp-content/u...d-Yates-QC.pdf

Anyway, I think you're absolutely right to steer well clear of any such contracts and clauses.

Thanks for that - interesting reading.

Despite the comments by QDOS, my feeling was always that, regardless of the meaning of the legislation, signing a contract with such a liability was going to allow a client to recover any liabilities to HMRC from the contractor's Ltd.

Unfortunately I suspect we'll see a lot more of these types of sham-OutsideIR35 contracts, which will catch out the unwary.