Late IR35 status determination

[Protagoras]

My reading of the clawback clause is that it would appear to limit liabilities to funds available from monies owed, rather than full retrospective recovery, is that the appropriate interpretation?

[eek]

My reading of the clawback clause is that it would appear to limit liabilities to funds available from monies owed, rather than full retrospective recovery, is that the appropriate interpretation?

No because we don’t know the actual terms in the contract - the clause I posted was to help the op identify what such a clause may look like

[Protagoras]

eek I thought that this was from the OP’s contract, hence my confusion.

Thanks eek

If we or any of our related bodies corporate are or become liable for the payment of any taxes, we may deduct the amount of our liability or prospective liability for the taxes of any amount due by us to you, whether under this agreement or otherwise

[TheGreenBastard]

Are there any cases of claw-back clauses for IR35 actually being upheld?

[eek]

Are there any cases of claw-back clauses for IR35 actually being upheld?

Not that anyone knows but remember the rules only came into effect in April 2021 and we are quite possibly looking at the second case here..

[Lance]

everyone else has made some good points. What a mess.....

I can add..... Contact your MP. The circumstance you are in is not what any of the legislation intended.

And.. you will need legal advice on this, but you may consider that as a LTD company it has limited liabilities. As such it may not have the means to repay all the tax back to the agency. This would make it insolvent and therefore could be wound up.
The biggest issue with insolvency is whether you have paid illegal dividends, but seeing as this has just come out of the blue I think you are clear. Obviously this is not a great outcome for you but it could make the worst case scenario not as bad financially.

IANAL - seek advice

[eek]

everyone else has made some good points. What a mess.....

I can add..... Contact your MP. The circumstance you are in is not what any of the legislation intended.

And.. you will need legal advice on this, but you may consider that as a LTD company it has limited liabilities. As such it may not have the means to repay all the tax back to the agency. This would make it insolvent and therefore could be wound up.
The biggest issue with insolvency is whether you have paid illegal dividends, but seeing as this has just come out of the blue I think you are clear. Obviously this is not a great outcome for you but it could make the worst case scenario not as bad financially.

IANAL - seek advice

Yet it is the exact advice HMRC gave me in April/May 2021 (the date will be on a post here) when I called them as an agency and asked about the exact scenario the OP has experienced. Their advice was get the money from the worker...

But yep the main advice has to be get advice and see if its possible / practical to close the firm down ASAP - as the bill is going to be massive once you start looking at employer NI...

[cojak]

I’m not sure if it goes without saying, but if I were you I’d get out of the contract - this isn’t going to get any better.

[eek]

I’m not sure if it goes without saying, but if I were you I’d get out of the contract - this isn’t going to get any better.

But again - get legal advice - breaching a contract would give the agency grounds to be awkward....

Mind you a week or months off sick from "stress" would be perfectly valid under this scenario....

[TheGreenBastard]

Not that anyone knows but remember the rules only came into effect in April 2021 and we are quite possibly looking at the second case here..

I have doubts the tax burden can be shifted onto the "worker", even if you have been given anecdotal advice from HMRC, it has not been legally tested. Some clauses simply cannot be exercised, e.g. you can't sell yourself into slavery even if it's your kink and you signed a contract.

As a thought experiment, if it can be passed to the "worker" by virtue of a "claw-back" clause, then companies with IR35 determination responsibilities could use agency layering to continually get out of the spirit of the most recent IR35 obligations - sell as outside, and retrospectively change determination. If tested in a court of law I can't see this happening, by all accounts the OP did their due diligence with IR35 reviews and you'd hope the law would see such clauses do not allow the real end client to skirt their legal obligation.