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If a client will change their mind mid-way.

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    If a client will change their mind mid-way.

    Not yet happened really, just for the discussion sake.

    Private sector client in scope of the reform, direct contract with contractor's Ltd, usual outside T&M contract. Both contractor and client carry on after 6th of Apr 21, no determination made, client continue to pay as if contract is outside IR35. They forgot, they did not cared or client have changed their mind for example.

    In June, client client finally pulls it out and making contract determination which comes back as 'Inside'. Where it leaves contractor?

    1. I believe that client will not be able to ask contractor to repay you some money to cover their newly arisen tax liability for past 3 months as that would be breach of contract between parties, however maybe there are other thoughts.

    2. Whole contract is now Inside, so if contractor will stay on Inside basis, that will mean they exposed as their previous term was also inside, but even if he leave, that will make his previous Outside determination quite weak as client is thinking otherwise.

    What do you reckon is probability of such U-turn in a middle of a contract and it's impact on a contractor?

    #2
    Originally posted by Sub View Post
    Not yet happened really, just for the discussion sake.
    But not worth discussing if the situation thought of is too fanciful to be able to comment and so off the rails we just don't know.
    Private sector client in scope of the reform, direct contract with contractor's Ltd, usual outside T&M contract. Both contractor and client carry on after 6th of Apr 21, no determination made, client continue to pay as if contract is outside IR35. They forgot, they did not cared or client have changed their mind for example.
    Don't let it get this far. Remind the client of their legal duty to assess the role and provide an SDS. That way you don't get in to the horrible mess that you mention below and that no one knows because it shouldn't happen. Too hypothetical, shouldn't happen and we don't know because it shouldn't happen.

    If at all possible you should already be engaging with the client to hopefully educate and lead them to an outside determination. Sitting there waiting for them to flounder will almost certainly end with an inside or PSC ban.
    'CUK forum personality of 2011 - Winner - Yes really!!!!

    Comment


      #3
      Originally posted by Sub View Post
      Not yet happened really, just for the discussion sake.

      Private sector client in scope of the reform, direct contract with contractor's Ltd, usual outside T&M contract. Both contractor and client carry on after 6th of Apr 21, no determination made, client continue to pay as if contract is outside IR35. They forgot, they did not cared or client have changed their mind for example.

      In June, client client finally pulls it out and making contract determination which comes back as 'Inside'. Where it leaves contractor?

      1. I believe that client will not be able to ask contractor to repay you some money to cover their newly arisen tax liability for past 3 months as that would be breach of contract between parties, however maybe there are other thoughts.

      2. Whole contract is now Inside, so if contractor will stay on Inside basis, that will mean they exposed as their previous term was also inside, but even if he leave, that will make his previous Outside determination quite weak as client is thinking otherwise.

      What do you reckon is probability of such U-turn in a middle of a contract and it's impact on a contractor?
      It leaves the contractor handing in their notice and walking from the client before the day is out.
      "I can put any old tat in my sig, put quotes around it and attribute to someone of whom I've heard, to make it sound true."
      - Voltaire/Benjamin Franklin/Anne Frank...

      Comment


        #4
        If the client did change their mind then probably the only option would be to pay the back tax and sue the client.

        The trouble is it isn't a dispute on the contract rate, it's a dispute on the tax deducted. You can't just keep it if too little tax was paid, it will have to get paid one way or another.
        I'm alright Jack

        Comment


          #5
          Can I check, we we say 'client' who would that be in the case of being paid by a consultancy and working with the end client?
          I am trying to understand which of these parties are responsbile for determining the 'SDS'.
          Any help, would be really appreciated as I am just going through this process now but both parties are dragging their heels and so I have pointed out I will not sign the contract in this case if not produced.

          Comment


            #6
            Originally posted by Northernlass View Post
            Can I check, we we say 'client' who would that be in the case of being paid by a consultancy and working with the end client?
            If it's T&M consultancy with you on the client site or interacting with client staff routinely (sounds like it), then it will be the end client that is responsible for the SDS. Otherwise, if it's a fully outsourced supply (consultancy delivering a turnkey solution), then the consultancy will be responsible.

            Comment


              #7
              To the OP, the contract most likely allows for such mistakes to be corrected, which means that YourCo will most likely need to refund the taxes owed. Of course, they can also start to withhold payments (a contract is unlikely to end without them owing money) and, when there's an agency in the supply chain, it's perfectly legitimate for the client to delay issuing an SDS until the first payment to the agency (thanks, IPSE). Yes, it also puts the prior period "at risk" if the working practices were the same.

              Comment


                #8
                Originally posted by jamesbrown View Post

                If it's T&M consultancy with you on the client site or interacting with client staff routinely (sounds like it), then it will be the end client that is responsible for the SDS. Otherwise, if it's a fully outsourced supply (consultancy delivering a turnkey solution), then the consultancy will be responsible.
                Hi James, thanks for the reply. I would be working on the second option with the consultancy, so contract alligned to milestones and deliverables and I would invoice once the deliverable has been produced. So this would be fixed price and a business to business contract with the consultancy. I have already requested the consultancy provides the SDS and put the pressure on, he has produced the CEST outcome and waivering with the end client at this stage as to who produces the SDS. To note, the end client is actually public sector and last I knew contracts are deemed 'inside' for public sector end clients.

                I am due to sign on Monday (or not as the case may be) and so just trying to ensure all ducks are in a row in the 'new world' of contracting so there is no confusion at a later stage etc.

                Comment


                  #9
                  Originally posted by jamesbrown View Post
                  To the OP, the contract most likely allows for such mistakes to be corrected, which means that YourCo will most likely need to refund the taxes owed. Of course, they can also start to withhold payments (a contract is unlikely to end without them owing money) and, when there's an agency in the supply chain, it's perfectly legitimate for the client to delay issuing an SDS until the first payment to the agency (thanks, IPSE). Yes, it also puts the prior period "at risk" if the working practices were the same.
                  Did you see the first example of an Outside to Inside IR35 change in determination earlier this week Contract has been retrospectively declared inside IR35 - Contractor UK Bulletin Board

                  I was busy on Thursday so only picked it up late on (after a lot of dodgy advice from others).
                  merely at clientco for the entertainment

                  Comment


                    #10
                    Originally posted by Northernlass View Post

                    Hi James, thanks for the reply. I would be working on the second option with the consultancy, so contract alligned to milestones and deliverables and I would invoice once the deliverable has been produced. So this would be fixed price and a business to business contract with the consultancy. I have already requested the consultancy provides the SDS and put the pressure on, he has produced the CEST outcome and waivering with the end client at this stage as to who produces the SDS. To note, the end client is actually public sector and last I knew contracts are deemed 'inside' for public sector end clients.

                    I am due to sign on Monday (or not as the case may be) and so just trying to ensure all ducks are in a row in the 'new world' of contracting so there is no confusion at a later stage etc.
                    The Public sector will offer both inside and outside IR35 contracts based on their actual needs Police National Computer Application Development Team members up to 5 individuals (initially) - Digital Marketplace is an example of 1 where everyone is expected to be inside IR35 (I post it as it's very rare for digital Marketplace contracts to be inside, they usually bypass that Marketplace and go direct to agencies / consultancies.

                    If it really is a fixed priced bit of work then you shouldn't have a problem but the issue you will have is that the consultancy may be selling it differently to how you are selling it and that is where the problem lies.
                    merely at clientco for the entertainment

                    Comment

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