Reply to: My agent admitted that they have no ROS in their contract. Can I sue them?

[malvolio]

I stand corrected but my guess would be this is the first ruling whereby a judge has come out and said that the upper contract has a bearing on the IR35 status. That is a complete guess though.

More or less accurate though. On the other hand, it is implicit in contract law that you are offering terms that you are capable of honouring. Clearly some agencies seem to want to work on the principle that they can put any old toffee in their contracts to get you to sign, even if they can't deliver against them becuase of the terms of the uppoer contract.

It's called misrepresentation. What we need is someone who has lost money on an IR35 or related contractual dispute to challenge their agency through the courts for damages.

[oracleslave]

So. I need to make sure there is a clause in my Ltd Co. contract that verifies the 'Upper' one is a back-to-back mirror image of it. How come this guy's insurance didn't pick-up on this when they passed his contract?

I stand corrected but my guess would be this is the first ruling whereby a judge has come out and said that the upper contract has a bearing on the IR35 status. That is a complete guess though.

[rawly]

Have a read of this in the context of the thread.

http://www.contractoruk.com/news/003621.html

So. I need to make sure there is a clause in my Ltd Co. contract that verifies the 'Upper' one is a back-to-back mirror image of it. How come this guy's insurance didn't pick-up on this when they passed his contract?

[oracleslave]

I don't fully understand this thread! If your contract is passed IR35 on the basis that you submitted Your Ltd Company/End Client contract for review(and it passed), how can anyone know what the Agency/End Client contract actually says unless you ask to see it? And what Agency will let you see this as it is between them and the end client!

I don't really follow.

Have a read of this in the context of the thread.

http://www.contractoruk.com/news/003621.html

[rawly]

I don't fully understand this thread! If your contract is passed IR35 on the basis that you submitted Your Ltd Company/End Client contract for review(and it passed), how can anyone know what the Agency/End Client contract actually says unless you ask to see it? And what Agency will let you see this as it is between them and the end client!

I don't really follow.

[SueEllen]

Thanks for those links. I'll remain a sceptic but will labour the point no more. One last comment- Why has the industry not developed "IR35 proof" schemes that involve closing companies down (say) every 2 years?

There are other posts on this but simply HMRC will notice and change the law like they did with MSCs.

[Fred Bloggs]

Thanks for those links. I'll remain a sceptic but will labour the point no more. One last comment- Why has the industry not developed "IR35 proof" schemes that involve closing companies down (say) every 2 years?

[SueEllen]

I am worrying because as I understood - MKM lost mostly because of the same problem. Lost that miserably that PCG even didnt want to appeal.

Or did I get it wrong?

The reports on here focus on the right of substitution but if you read the judgment properly there are other issues such as the contract being between the person himself rather than the guy's limited company, the contractor billing when the system was down and the client could refuse leave. You can find the judgment (and other recent judgments) on here http://www.contractoruk.com/ir35/index.html


In your case:
1. don't work when there is nothing to do and bill for it
2. you turn up when you like within what you feel is reasonable to get the work done.
3. you take time off when you like
4. you sound like your services are used to work on specific project(s)


Oh and I'm sure malvolio posted something stating that the PCG didn't want to appeal but go after the agent for knowingly being dishonest.

[babason]

After I received QDOS news about 2 guys lost their IR35 cases and both sounded perfectly as meself I called MD of my agency and asked to double check if agent-cleint contract has ROS (I have ROS between my ltd and the agent).

MD said - no they dont as the client would never sign that contract.

Seems like a year of my life is screwed.

I had the same fright recently. I'm a little calmer now. At the end of the day RoS is only one of the relevent issues. At least as important are MOO and D&C. Reading some of your later posts if you had to go to court you'd be OK. I agree though that I'd rather not have had to go through the hassle.

The another question is - guy within the agency who managed my contract told me in email (which I believe still have) that agency have mirror copy of my contract with the client. Can I sue them for deception?

Cos they mislead me to believe that I was outside IR35.

Possibly but the probability of success is low and life is too short. Look at it from their point of view. Are they really gonna win the business by haggling over RoS with non receptive clients on your behalf? Once clients become receptive to RoS clauses they will start appearing in contracts. Clients HATE changes in contracts! Agencies are not in a position to force the issue when the client has nothing to gain. You need to focus on documenting your working arrangements asap. If your client confirms what you've told us you'll probably be outside.

RoS is just a mechanism (a perfectly valid one) which (usually) wards off the initial investigation. However for the vast majority of us it would actually make poor business sense to actually invoke it and as such it doesn't help much if we are dragged to court. Once in court the primary issues are D&C and MOO.

The time to get uppity is at renewal. Once the client has offered you an extension it is now clear they have something to lose! A client is more likely to be receptive when faced with the hassle of getting rid of you and reinterviewing...

Just my tuppeny worth...feel free to ignore...

[kingshuk]

I'm with Fred. I understood one of the ways the company's liabilities get passed on to the director is if it's owed to the tax man...

IANAA and I am assuming neither are you.
There are a good number of posts here from accountants explaining why you are wrong. I haven't seen any refutal of those from other accountants (or other legal experts like qdos,accounttax etc).

For example there are some good points here -
http://forums.contractoruk.com/accou...9-000-a-3.html

Its a long thread so copying the relevant stuff -

Responding to malvolio's post -

Originally Posted by malvolio
No, absolutely not. IR35 is a personal tax, not a corporate one, it's merely paid by the company on your behalf. The whole point is that the company is a fiction, isn't it

THEPUMA wrote -

I'm sure you've said this before and I'm sure I told you then that it was nonsense. IR35 is the company's liability and unless it can be shown that you knew that it applied and deliberately ignored it, HMRC cannot recover taxes from you personally.

- bold mine.

Then again responding to malvolio's post -

Originally Posted by malvolio
Hmmm... You can't close the company without HMRC approval, which will not be forthcoming if they think an aspect enquiry is warranted, which it will be if you keep setting up and closing companies. So it is a defence for maybe three iterations. Once they start an enquiry, they can potentially re-examine any other contracts since they will also be looking at unpaid income tax. It doesn't have to be an IR35 enquiry...

THEPUMA wrote

It makes no difference. You don't have to close the company down. You may have an ongoing company with no assets. HMRC still can't recover them from you personally in normal circumstances.

And you don't necessarily need HMRC approval to close down a company. They have to not object, which is different to giving approval. If you go down the capital route, they give approval but this is from the CT district and therefore IR35 is unlikely to even be considered. Certainly, I've never had any queries on it when closing down a contractor company.

Another post from IR35 avoider (who is not an accountant) -

Employers NI is not a personal tax and cannot be passed to the individual (except maybe if he is so obviously caught that he has been negligent as a director in not paying it.)

Also, there are rules that can prevent unpaid salary bills from being passed from employers to employees, and these apply in IR35 cases as well. HMRC cited these rules as one of the reasons for introducing the MSC legislation. People who were clearly IR35-caught could not be personally made to cough up, and the MSC provider would just let the MSC go broke without paying and start a replacement overnight. (I think if you have made your IR35 decisions in good faith then these rules may prevent the bill being passed to you, even if your decisions were wrong. Of course without heavy-duty support such as PCG membership might bring, people won't know this, so will just pay up.)
...

- again bold mine

[maxima]

I am worrying because as I understood - MKM lost mostly because of the same problem. Lost that miserably that PCG even didnt want to appeal.

Or did I get it wrong?

[VectraMan]

I am really sceptical about this idea of if the Ltd Co doesn't have any cash then the Director gets off scot free. I.

I'm with Fred. I understood one of the ways the company's liabilities get passed on to the director is if it's owed to the tax man. But even if that's not the case, having lost your IR35 investigation you'd probably have another fight on your hands to hide behind your limited liability, and presumably the PCG or other insurance wouldn't support you in that. So who would bother?

Also if the company has no money to pay its debts, but the directors have received large dividends, then aren't you in trouble via that route? I.e. the profits that your dividends were based on are now not valid (thanks the the IR35 loss), so you need to either repay the dividends (in which case pleanty of money for the IR35 bill), or you need to pay full income tax on the dividends (which is the same thing). Seems to me the only way out is if you go personally bankrupt as well (or you pay all the money as salary in the first place).

[malvolio]

some people believe in God, some in Another God, some in UFO, some in MOO. I believe that I am independent from my end client in terms of employement. I believe that my company is taking risks. But would the Judge/Commisioner believe the same?

I do software in the way I want, I work up to their spec but I dont need to be told how to do so. I turn at work at time I like (10 o/c) but I work at least 7hr plus lunch. I took few days off when I didnt have enough things to do. When I get sick or went to holidays - I didnt get paid and if I wont be able to carry on with the contract for 3 consequentive weeks for any reason I will lose it altogether).

I work quite hard to get that money and I'd work that hard only for that level of tax which I expect. Otherwise I'd go to permanent employement and do nothing for smaller money. That is my point. Which differs with current HRMC position.

On that basis you are outside IR35, so why are you worrying? That is not the problem, paying an agent for an illegal contract is the problem. You want to be a contractor running an independent business, start thinking like one.

[kingshuk]

I am really sceptical about this idea of if the Ltd Co doesn't have any cash then the Director gets off scot free. I really don't buy it at all, yet it seems to be a theme that pops up here every few days. If it was so easy to proof yourself against IR35 by drawing out all the money and closing the business down, wouldn't be all be doing this every year?

The silence from the professionals who inhabit this place needs to be broken by a comment please.

IR35 is a personal tax levied on a person is it not? Having no money to pay is not a defence? Myself, I think you're kidding yourselves.

This has been explained several times by an accountant here called THEPUMA(he is from Hillier Hopkins I think)

See his post in this thread - http://forums.contractoruk.com/accou...ce-ir35-3.html

There are several other threads where this is discussed in detail.

[dude69]

I am really sceptical about this idea of if the Ltd Co doesn't have any cash then the Director gets off scot free. I really don't buy it at all, yet it seems to be a theme that pops up here every few days. If it was so easy to proof yourself against IR35 by drawing out all the money and closing the business down, wouldn't be all be doing this every year?

The silence from the professionals who inhabit this place needs to be broken by a comment please.

IR35 is a personal tax levied on a person is it not? Having no money to pay is not a defence? Myself, I think you're kidding yourselves.

I believe it is the advice of Garbetts