Should I agree a tax indemnity?

[baxp68]

I’m self-employed (sole trader). I’ve been working for a client for a few months on a pretty thin contract for services which pretty much just spells out basic commercial terms and the project deliverables.

They just dropped on me a chunky new proposed contract which introduces a bunch of new obligations including a tax indemnity which wants to offset any tax risks from the contract onto me. Presumably this is intended to capture any potential liability (eg employer NICs) from their side should there ever be some sort of challenge of my non-employee status.

V low risk in my case but I don’t see why on principle I should give such an indemnity for taxes that are basically their responsibility.

but am I being stubborn? Is such an indemnity “normal”?

[jamesbrown]

It’s rare for those working in professional services to operate as a sole trader. There has always been a tax risk to the supply chain above you of operating in this way, so it isn’t surprising to hear, and it is certainly becoming more common to see these indemnities in B2B contracts more generally. However, you should not accept it, especially as a sole trader, because the risk is being shifted to you personally. You may think the risk is low, but it’s hard to quantify and they presumably want to shift the costs of defending any inquiry too. Anyway, I would not accept that risk (but then I would also not accept the risk of operating as a sole trader).

[baxp68]

Thank you - I appreciate the comments.