Client Co has shown their colours...

[ladymuck]

Hmmm. I think I read it differently than that. I would paraphrase as "except where we have failed to provide reasonable care in arriving at the SDS, then the supplier (YourCo, presumably) will indemnify us for all taxes etc. due in the event that the SDS is wrong". Afterall, if the SDS says that you're inside, then it's moot and, if it's outside and wrong, the Fee Payer is ordinarily responsible once the supply chain has received the SDS, compiled with reasonable care. They are attempting to shift the latter responsibility as a matter of contract law. This isn't just about protecting them from the failures of YourCo, but also their failure in supplying a correct SDS (one that said outside when it should've said inside), but with reasonable care.

Either way, the risk is principally theirs, whether they like it or not. There is no personal indemnification here, assuming the Supplier is YourCo and not you personally.

I see where you're coming from but if the SDS is wrong that's their fault. If they say they took reasonable care then surely they would have to demonstrate that in order to prove the liability?

Anyway, it's all moot as the chances of an outside determination are slim and I'm in exit planning mode.

[jamesbrown]

I see where you're coming from but if the SDS is wrong that's their fault. If they say they took reasonable care then surely they would have to demonstrate that in order to prove the liability?

Anyway, it's all moot as the chances of an outside determination are slim and I'm in exit planning mode.

Yeah, it sounds like it's moot.

However, one of the many problems with this legislation is that your first comment is unfortunately not the case (if I understood you correctly). The Fee Payer remains liable in all circumstances other than fraud or when the SDS was completed without reasonable care. Reasonable care != SDS correct. Afterall, HMRC can't even get their status determinations correct in a majority of cases. If the SDS is wrong, but completed with reasonable care, the Fee Payer takes the hit (sounds like the client is also the Fee Payer in your case), even though they didn't necessarily produce the SDS. The Fee Payer can try to pass that on, contractually, which is what they are doing here.

[ladymuck]

Yeah, it sounds like it's moot.

However, one of the many problems with this legislation is that your first comment is unfortunately not the case (if I understood you correctly). The Fee Payer remains liable in all circumstances other than fraud or when the SDS was completed without reasonable care. Reasonable care != SDS correct. Afterall, HMRC can't even get their status determinations correct in a majority of cases. If the SDS is wrong, but completed with reasonable care, the Fee Payer takes the hit (sounds like the client is also the Fee Payer in your case), even though they didn't necessarily produce the SDS. The Fee Payer can try to pass that on, contractually, which is what they are doing here.

I get you. It's very subtle. So the Supplier (that's the consultancy / fee payer) will be on the hook unless they can prove due care was not taken.

They will seek to pass that liability to me even though the (draft) legislation say it's their problem to fix.

I can say that the consultancy don't want that risk. And I don't see why either of us should cop the flak for the Client getting it wrong, which is exactly what HMRC seem to expect.

[jamesbrown]

I get you. It's very subtle. So the Supplier (that's the consultancy / fee payer) will be on the hook unless they can prove due care was not taken.

They will seek to pass that liability to me even though the (draft) legislation say it's their problem to fix.

I can say that the consultancy don't want that risk. And I don't see why either of us should cop the flak for the Client getting it wrong, which is exactly what HMRC seem to expect.

I think so. Like you say, it's subtle, so you may want to run it through a commercial review if it comes to that.

[WordIsBond]

FWIW, in my view JB is right here. Key text:

For the avoidance of doubt, the Supplier shall indemnify the Company and keep the Company indemnified in full in the event that the Company becomes liable to account for deductions of income tax, Apprenticeship Levy and/or National Insurance Contributions, or payment of employer National Insurance Contributions, in respect of any Limited Company Contractor (together with any associated interest and penalties), other than in circumstances where the Company has failed to exercise reasonable care in reaching a Status Determination Statement conclusion. The parties agree that the Company shall be deemed to have exercised reasonable care if it has reached the Status Determination Status conclusion in accordance with the provisions of this Clause.

There's two sentences there. The first, long one, the last part of which you bolded in your quote earlier, says that you'll indemnify them if they've exercised reasonable care. The second one, that I've now bolded, says that you agree they've exercised reasonable care if they abide by what's described elsewhere in the contract.

So if HMRC comes along and says, "It's wrong, she's inside," they can say, "Well, we exercised reasonable care, you've agreed to that, so you indemnify us as you agreed."

Of course, whether it's enforceable and whether YourCo even exists, and has the funds, when it happens, is another question....

[ladymuck]

FWIW, in my view JB is right here. Key text:


There's two sentences there. The first, long one, the last part of which you bolded in your quote earlier, says that you'll indemnify them if they've exercised reasonable care. The second one, that I've now bolded, says that you agree they've exercised reasonable care if they abide by what's described elsewhere in the contract.

So if HMRC comes along and says, "It's wrong, she's inside," they can say, "Well, we exercised reasonable care, you've agreed to that, so you indemnify us as you agreed."

Of course, whether it's enforceable and whether YourCo even exists, and has the funds, when it happens, is another question....

Hmm...thank you (in a non-passive aggressive way FTAOD)

Definitely food for thought.

[WordIsBond]

Er, thanks for making me look up FTAOD.

[ladymuck]

Er, thanks for making me look up FTAOD.

It's safer than most of the acronyms used around these parts.

[northernladuk]

Er, thanks for making me look up FTAOD.

Lucky you didn't confuse it with LMs other favourite which is FOAD.

[BR14]