UKGov can see fit to sue me for any contractor tax that isn’t paid by said contractor

[AlxD]

Hello,

There is a clause in a contractor agreement that was proposed to me that I am not comfortable with and I would like feedback on please.

The clause is as follows:

4.7 pay all Taxes due to the Tax Authorities and

comply with all and any requirements for filing

tax returns, and fully indemnify and keep us

indemnified upon demand against any costs

(including reasonable legal costs to defend any

claim) claims penalties or demands of us which

may be made by the Tax Authorities or any of

them in respect of non payment of the Taxes

whether or not justified;

The second half of that statement I had issues with. Here is my e-mail to the agency and their reply:

My email:
I suggest that we can do without the second half of clause 4.7 as two companies doing business together we are to share the potential for profit and the risk in a equitable way. Plus as a two independent legal entities each has their responsibility with regards to tax I cannot think of a situation where hypothetically my company has tax troubles and that translates in tax authorities suing you therefore I have difficulty seeing what you are protecting against.

Agency reply:
I don’t believe I can move on that simply because in the UK, Her Majesties Government can see fit to sue me for any contractor tax that isn’t paid by said contractor. I appreciate that you are honest but should something happen to you for whatever reason and you were unable to pay any taxes due in the UK then they would come after my company for the monies owed.

I hope that makes sense? It’s simply how UK tax law can work sometimes and I need to reduce any risk to my company after monies have already been paid over in good faith.

Edit: the contract is not for the UK government.

[cojak]

Is this contract working for the UK Government (NHS or something)?

If it is you may want to read this thread...

http://forums.contractoruk.com/busin...ntracting.html

[TheFaQQer]

Agency reply:
I don’t believe I can move on that simply because in the UK, Her Majesties Government can see fit to sue me for any contractor tax that isn’t paid by said contractor. I appreciate that you are honest but should something happen to you for whatever reason and you were unable to pay any taxes due in the UK then they would come after my company for the monies owed.

They can if you are a sole trader. Not if the contract is between agency and a Ltd company (be that your own Ltd or an umbrella).

That said, I don't see much wrong with the clause - it says that you are liable for your tax bills. Which is correct whether it's in the contract or not.

[craig1]

This is just a deliberately vaguely worded protection for the agency in case you're deemed to be a disguised employee by HMRC or a court and they're given a tax bill for employers NI, etc. They just want a mechanism where you agree to be liable for those extra taxes.

No point talking to the typical agent about it though as they'll have no clue about the legal basis for 9/10ths of the contract.

[AlxD]

Thank you for your replies

Thank you for your replies

The contract is not for the UK government. The entities involved are all private companies.

Do you guys have or had similar clauses in your contracts?

[kevpuk]

I recall similar clauses in contracts - to my mind, and as others have said, it is just the agency making it quite clear that they do not see themselves as an employer in any way, shape or form and that you will be liable for all applicable taxes.
There are some routes whereby if taxes are not paid, Hector can look at trying to get monies owed from other links in the chain - under certain circumstances - and so this clause/similar ones is aimed at negating risk to agency.

[northernladuk]

Do you guys have or had similar clauses in your contracts?

Just had a look and I do but not worded quite like that. Same end though.

[VectraMan]

There are some routes whereby if taxes are not paid, Hector can look at trying to get monies owed from other links in the chain - under certain circumstances - and so this clause/similar ones is aimed at negating risk to agency.

Although in reality, if you'd already committed tax evasion / fled the country / changed your name, you're hardly likely to be bothered by an agency trying to sue you to recover tax it's had to pay on your behalf. And if you legitimately can't pay your taxes because you're bankrupt, then the agency isn't getting the money back either. So it's an entirely pointless clause.

[SueEllen]

Thank you for your replies

The contract is not for the UK government. The entities involved are all private companies.

Do you guys have or had similar clauses in your contracts?

Yep mine all have similar clauses though aren't worded that badly.

They also have lots of clauses through out the contract making it explicitly clear the relationship is a business to business one.

If HMRC says you are a employee then you pay up what they demand, however you don't pay the agency's legal costs for screwing up their own dealings with HRMC. I suggest you get your contract reviewed by someone who knows enough English law legal language to modify that and other clauses in your contract.