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Can agencies/clients try to claw back monies back if determination is incorrect?

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    Can agencies/clients try to claw back monies back if determination is incorrect?

    Hey look, yet another IR35 post - but just one point of clarity that my google searches can't quite give me the answer to due to all the result noise.

    Scenario: New contract, client uses CEST (groan) to make their status determination in good faith as Outside. You the contractor receive your standard day rate and administer your company as usual.

    Then disaster strikes and HMRC decide you're actually in. Who then pays? The 'employer', of course, has to then backpay Tax and NI, but I'm trying to work out if there's any potential blowback on the contractor in this event. Do they claw money back to you by some means? Does it change how I've administered my accounts?

    Let me know if I'm being blind but I can't find an article that nails it on this point in terms of risk/mitigation strategy. Or in other words, I'm trying to work out if there's an appropriate insurance I should be taking out on my own behalf.

    #2
    You can come up with millions of such scenarios in your mind to protect yourselves with every possibility. But in the end it is going to scare you more. If I were you, I would stop overthinking and give myself some rest.

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      #3
      You can assume they will try and claw back the tax. That is their duty. No point in worrying about it as the contractor was in any case liable before the new rules. Simply assume your risk hasn't changed. If you don't want uncertainty then simply go through payroll.
      I'm alright Jack

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        #4
        Originally posted by cloudcontractor View Post
        Scenario: New contract, client uses CEST (groan) to make their status determination in good faith as Outside. You the contractor receive your standard day rate and administer your company as usual.
        Very pedantic point but we need to stop thinking about 'standard day rate'. If we can change our thinking and move towards sow based fixed payments. Yes it could come out looking like a day rate but changing thinking away from SDR then we can start up the path of changing to fixed price deliverables one step at a time. Standard day rate immediately sounds inside and is something we need to get away from. It might have been standard in the past but if we can get away from that it will help define being a business not a bum on seat. Just sounds wrong when you use the word standard.
        Then disaster strikes and HMRC decide you're actually in. Who then pays? The 'employer', of course, has to then backpay Tax and NI, but I'm trying to work out if there's any potential blowback on the contractor in this event. Do they claw money back to you by some means? Does it change how I've administered my accounts?
        Which is undoubtedly going to happen at some point. It's up to you to make sure you've done your diligence and the reason for the inside determination is because you've let the client be sloppy and not checked/questioned and that you've not just carried on knowing it's inside. There is also the chance you've let it go inside by not acting correctly in your working practices. If any of those apply then yes, I can totally see why the client won't shoulder the cost and will pass it to the contractor. It doesn't change how you administered them. HMRC will just go back and account for you being inside and charge you what you should have paid plus penalties plus interest.
        Let me know if I'm being blind but I can't find an article that nails it on this point in terms of risk/mitigation strategy. Or in other words, I'm trying to work out if there's an appropriate insurance I should be taking out on my own behalf.
        You won't be able to find any as the legislation hasn't hit yet and it's an extremely hypothetical view that no one will stick their neck out to predict so early. You see plenty of articles repeating HMRC's promise to honour CESTS but I think you'd be hard pressed to find anyone in any position that truly believes that so whoever wrote those will have egg on their faces when the first investigations start.
        Last edited by northernladuk; 1 April 2021, 10:03.
        'CUK forum personality of 2011 - Winner - Yes really!!!!

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