IR35 Indemnity

[David71]

All

Just got offered a Me-->Agency-->End Client contract and have been looking through the Me-->Agency contract quite closely. FYI: contract is with QDOS at the mo for a full review.

The IR35 SDS from the client states Outside IR35 .... but.... there's a clause in the contract which states:

In the event at any time during the Project Period a determination is made by the Client, HMRC or any third party that the Contractor is operating within IR35, the Company may seek to recover from the Contractor such PAYE, Income Tax and National Insurance Contributions as calculated by the Company in respect to Fees previously paid to the Company for the Project and shall deduct PAYE, Income Tax and National Insurance contributions in respect to any further Fees paid following such determination save that the Company may at its absolute discretion terminate this agreement with immediate effect in accordance with clause 6.1.6.

Now I don't mind being liable for any FUTURE inside taxes etc. if the status is changed by the client or HMRC but I don't want to be liable for any previously paid fees if the status change is backdated.

I've told the agency that if the clause stays, I don't.

I know this whole area has recently been discussed in another post so am not looking to go over old ground but I had a call from the agent who has told me this clause has been queried by other contractors before me and their compliance director refuses to move it. The agent then went on to say that I'll have a working practises review after 4 weeks (which will cost me £150 but there we are) and that if Paystream (the review company) declare that I am Outside IR35 then they will 'indemnify' me against any future claims due to IR35 status changes.

I'm going to give Paystream a call tomorrow to find out what this 'indemnification' involves, but I was wondering if anyone on here has any experience of, or info about, IR35 indemnities?

Cheers

[Lance]

the bit that is key I think is " may seek to recover from"

well they can seek all they like. That clause doesn't transfer any liability. It simply states the obvious fact that they can seek any redress they wish.
I wouldn't worry about the clause.

Although I might worry about Paystream's involvement. And anything the agent says that's not in the contract (if it's not in the contract with the agency then it's worthless)


QDOS advice is unlikely to be helpful as they will simply do an IR35 review which is not you question. Unless you've asked them for a more detailed legal review.

IANAL.

[jamesbrown]

It's questionable whether they would succeed, but you have to assume they might. If "Contractor" in this case is YourCo, and not you personally, then the worst that is likely to happen in this scenario is that they will succeed in recovering some money from unpaid invoices, so you may be able to mitigate by shortening the payment terms. Personally, I wouldn't sign a contract with this sort of fluff inside it, but it depends whether you can afford to walk. As to experience of indemnities, in practice, you are highly unlikely to find any experience.

[Fraidycat]

If HMRC do challenge the status you will likely hear about it well before, months or years before.

HMRC will want to speak to you as the contractor. And see if you will drop the client or agency in it. Prior to April it was the other way around, the client could drop you in it by what they told HMRC.

So you will get plenty of notice to withdraw all your reserves from your Ltd. The agency cant get blood out of a stone.

[northernladuk]

I assume the client/agent has issued and SDS saying the gig is outside?

[eek]

All

Just got offered a Me-->Agency-->End Client contract and have been looking through the Me-->Agency contract quite closely. FYI: contract is with QDOS at the mo for a full review.

The IR35 SDS from the client states Outside IR35 .... but.... there's a clause in the contract which states:

In the event at any time during the Project Period a determination is made by the Client, HMRC or any third party that the Contractor is operating within IR35, the Company may seek to recover from the Contractor such PAYE, Income Tax and National Insurance Contributions as calculated by the Company in respect to Fees previously paid to the Company for the Project and shall deduct PAYE, Income Tax and National Insurance contributions in respect to any further Fees paid following such determination save that the Company may at its absolute discretion terminate this agreement with immediate effect in accordance with clause 6.1.6.

Now I don't mind being liable for any FUTURE inside taxes etc. if the status is changed by the client or HMRC but I don't want to be liable for any previously paid fees if the status change is backdated.

I've told the agency that if the clause stays, I don't.

I know this whole area has recently been discussed in another post so am not looking to go over old ground but I had a call from the agent who has told me this clause has been queried by other contractors before me and their compliance director refuses to move it. The agent then went on to say that I'll have a working practises review after 4 weeks (which will cost me £150 but there we are) and that if Paystream (the review company) declare that I am Outside IR35 then they will 'indemnify' me against any future claims due to IR35 status changes.

I'm going to give Paystream a call tomorrow to find out what this 'indemnification' involves, but I was wondering if anyone on here has any experience of, or info about, IR35 indemnities?

Cheers

Do Paystream do IR35 reviews as Ive never seen them advertise or mention the fact.

SJD (Ai) WTT (human), Qdos (human) and even Dave Chaplin (Ai) I would trust but I've never even heard of Paystream doing such a thing.

Personally I would be walking if that clause isn't removed, how would an umbrella firm indemnify you and why should you be paying for something that post April 2021 is completely outside our control.

What notice period do you have as if it's 1 or 2 weeks you could just keep hunting and quit before the month is out.

Finally, given the way HMRC have treated the home office and DWP I would be very wary of anything that passes things up the chain back to you.

[David71]

Cheers all for the advice.

Not sure what to do yet - I don't 'need' this gig as I've already got one on the go and have got two potential other contracts simmering.

I think the Lance is right that "may seek to recover from" is quite important but I'm a bit annoyed at the agency for not even wanting to discuss the clause and point blank refusing to change anything in their contract - their attitude is that 'this is the contract we use for all Outside IR35 contracts and it's not being changed'. I've had plenty of small changes made to contracts over the years so this is a first for me.

I'm going to see what QDOS come back with and have a further look at the Paystream 'indemnity' but have a feeling I'll be not taking this one on.

One thing, I want to let the client know the reason I withdraw as I don't want to get a rep for accepting a gig then backing out - think it's alright to email the client Project Manager directly to explain?

[ladymuck]

One thing, I want to let the client know the reason I withdraw as I don't want to get a rep for accepting a gig then backing out - think it's alright to email the client Project Manager directly to explain?

That depends very much on the industry and your specialism. If it's a small, niche community then it could be worthwhile. If you thought highly of the PM then you could just send a note saying thanks for giving me the opportunity and you're sorry it didn't work out but sadly contractual terms were not favourable on this occasion. If they care, they may ask for more info but don't be surprised if you hear nothing back. Sending war and peace will do you no favours.

What you have to remember is that the client doesn't really care about the terms you have with the agent / umbrella as the whole point of passing on the work to them is to avoid doing it themselves. The overarching contract they have with the agency may well include clauses that cover this indemnity and they've been sold that as a benefit of working with the agency.

I'm often in two minds over whether to drag the client into this and you'll get varying opinions from the collective.

[Lance]

One thing, I want to let the client know the reason I withdraw as I don't want to get a rep for accepting a gig then backing out - think it's alright to email the client Project Manager directly to explain?

you haven't accepted anything until you've signed the contract.

[eek]

That depends very much on the industry and your specialism. If it's a small, niche community then it could be worthwhile. If you thought highly of the PM then you could just send a note saying thanks for giving me the opportunity and you're sorry it didn't work out but sadly contractual terms were not favourable on this occasion. If they care, they may ask for more info but don't be surprised if you hear nothing back. Sending war and peace will do you no favours.

What you have to remember is that the client doesn't really care about the terms you have with the agent / umbrella as the whole point of passing on the work to them is to avoid doing it themselves. The overarching contract they have with the agency may well include clauses that cover this indemnity and they've been sold that as a benefit of working with the agency.

I'm often in two minds over whether to drag the client into this and you'll get varying opinions from the collective.

My viewpoint would always be to apologise because you never know if you may encounter them again - but don't go into details, just say there are issues in the contract that can't be resolved.