Outside SDS but liability added to contract

[ChocolateTeapot]

Hello,

I received an outside ir35 determination for a gig I'm working. However, the contract terms were updated and the client has added a condition that my company will reimburse them in the event of an employment investigation.


I'm reading that to mean that if there's an IR35 investigation and they get fined, they'd be allowed to pass on the fine to my company.


I'm seeking legal advice separately, but wondered - for other contractors is this a normal provision? I thought the point of the legislation change was to pass liability to the client.

[simes]

This is very very interesting.

A year or two ago, in trying to figure ways around, or through, Inside IR35 determinations, I wondered if your situation would, or could, ever be introduced to a contract, either at the contractor's behest to encourage an Outside determination, or by the client looking to mitigate their risk.

By the gobbiest of the gobs, (the usual bunch who later found themselves on my Ignore list) this wondering was laughed out of court so quickly, and so loudly, I left it alone. And yet, apparently, here we are.

If this is the case, and you're happy to fight for an Outside determination, you want to pop this by the likes of Qdos to see if contractor insurance is still a viability.

Needless to say, I am very interested in hearing the outcome of this so, please do keep us updated. Good luck.

[jamesbrown]

There's nothing particularly surprising about this. It's already common to have clauses that limit liability to tax loss or other losses.

Nevertheless, there is a very strong incentive for the client to be correct in their SDS and to stick by it under HMRC investigation because, regardless of whether these clauses prevail in contract law (debatable, but will surely depend how tightly they are drafted), the supply chain above the contractor's PSC is absolutely paying out first. Clawing this back from the contractor's PSC may be very difficult, even with delayed payment terms or payments withheld until completion because any investigation is likely to be years down the line and the PSC may be long gone. So this is a real risk for the client and they better be confident about their SDS and be willing to defend it, no matter whether these small comfort blankets work in contract law.

All that said, I would avoid accepting anything that propagates any liability down to the contractor personally.

[simes]

All that said, I would avoid accepting anything that propagates any liability down to the contractor personally.

Even if there was insurance a contractor would take to shunt it further down the line? If an Outside determination is possible in this scenario, then would it be commercially viable to go with this method? Without further information, particularly the insurance a contractor would need, it might bear further investigation but, with the right insurance, I most certainly would consider it.

OP's situation was exactly as I was considering possible options back in the day.

[jamesbrown]

Even if there was insurance a contractor would take to shunt it further down the line? If an Outside determination is possible in this scenario, then would it be commercially viable to go with this method? Without further information, particularly the insurance a contractor would need, it might bear further investigation but, with the right insurance, I most certainly would consider it.

OP's situation was exactly as I was considering possible options back in the day.

Each to their own risk, I suppose, but I would be looking extremely carefully at the T&Cs because there may be "no reasonable prospect of success" if the client decides to change their SDS, in which case the insurance may not be what you think.

[simes]

Each to their own risk, I suppose, but I would be looking extremely carefully at the T&Cs because there may be "no reasonable prospect of success" if the client decides to change their SDS, in which case the insurance may not be what you think.

Yup, good points all.

From a contractor's point of view, this might not be so far removed from where s/he is right now (these last six days to D Day). This of, IR35 looming large and over them.

I am then minded to query, if the decision went against the client and monies were to be detracted from a contractor, insurance notwithstanding, whether there would or could be recourse for a contractor to go to court with the HMRC all over again. If not insurance for monies, insurance to be again assigned legal help.

I really do not know... But it is intriguing.

[northernladuk]

Yup, good points all.

From a contractor's point of view, this might not be so far removed from where s/he is right now (these last six days to D Day). This of, IR35 looming large and over them.

I am then minded to query, if the decision went against the client and monies were to be detracted from a contractor, insurance notwithstanding, whether there would or could be recourse for a contractor to go to court with the HMRC all over again. If not insurance for monies, insurance to be again assigned legal help.

I really do not know... But it is intriguing.

It would be helpful if you either start every post with bit in bold or put it in your sig. HTH