Reply to: Agent requests indemnity

[outsidein]

It took a while but the agency backed down from the personal indemnity

Then we argued the toss over the wording of the rest of the indemnity which ws decidedly IR35 toxic - affecting the substitution clauses in the contract.

Anyway, it was reduced it to "Is your Ltd company a PSC", "Your limited company will not forward the money to a 3rd party" and "will you pay yourself only salary and dividends"


Latterly it contained "Are you a shareholder of your limited company", "you won't forward monies to a 3rd party for providing the services" and "you pay taxes on the dividends and salary you pay the directors"

Allegedly 40 our of 50 consultants signed the first version, and we're down to the 'last few' - but the deed is now somewhat less onerous.

I struggle to believe that 80% of contractors would just sign a personal indemnity!!!

FYI the agent originally asked for the NI number under the signatures - I am waiting for confirmation that these will not be required.

Its been a nasty couple of weeks - I wouldn't wish them on anyone.

[TheFaQQer]

So what they're saying is if you a) don't pay your taxes, and b) the government find a way to make the agent pay, then you personally owe the agent the taxes that you should have paid in the first place.

Seeing as neither a nor b are likely, what's the problem? They just want an assurance that you will continue to operate as a Ltd., which you will. If their fear is completely groundless then this clause is irrelevant.

If the agency doesn't pay the VAT relating to the supply of your company, then your company and the directors would be liable for it.

It's about them not paying their taxes properly.

[Boo]

So what they're saying is if you a) don't pay your taxes, and b) the government find a way to make the agent pay, then you personally owe the agent the taxes that you should have paid in the first place.

Seeing as neither a nor b are likely, what's the problem?

The problem is that the agency are asking the OP to personally pay their tax for them if HMRC should come knocking. Note that this is the agency's tax, not the consultancy's tax, just because HMRC will never ask the agency to pay the consultancy's tax.

I'd walk away from any such commitment, but of course the OP must come to their own decision.

Boo2

[LisaContractorUmbrella]

What legislation?

Changes to the Agencies legislation within section 44 of the ITEPA

[Wanderer]

In order to ensure full compliance with the legislation effective 6th April 2014

What legislation?

[VectraMan]

The Supplier and the individual Directors personally jointly and severally indemnify
(and will continue to keep indemnified) both <AgentCo> and its Directors against any
claims by HMRC or any government body or fiscal authority for any sums required to
be paid in connection with the fees paid by <AgentCo> to the Supplier for the provision of
the Services. This includes any PAYE, Income Tax, National Insurance Contributions
and any other taxes or levies or penalties.

So what they're saying is if you a) don't pay your taxes, and b) the government find a way to make the agent pay, then you personally owe the agent the taxes that you should have paid in the first place.

Seeing as neither a nor b are likely, what's the problem? They just want an assurance that you will continue to operate as a Ltd., which you will. If their fear is completely groundless then this clause is irrelevant.

[LisaContractorUmbrella]

Would be interested to see how they could go about actually deducting PAYE. First off they would surely need your tax code / NI Number and all the other things you don't bother to collect when you a dealing with a PSC in a B2B relationship.

I am sure others on here are more rounded on where this could lead, but ultimately this could lead to all sorts of deemed employment issues.

Another perfect example of an agency in a panic when they don't understand the issue [prays that my compliance department hasn't sent this out]

Presumably if they weren't satisfied that the correct tax position was being adopted they would take the OP on their books and cancel the PSC contract - it's the only way that the situation could be dealt with in the way that they describe.

Not sure this is a panicked response or not but the indemnity clause is a fairly typical way for some agencies to deal with compliance issues

[Andy Hallett]

Don't know how to break it to you but you are the only one that generally gets these concepts

FTFY

[eek]

Another perfect example of an agency in a panic when they don't understand the issue [prays that my compliance department hasn't sent this out]

Don't know how to break it to you but.......

[Andy Hallett]

Would be interested to see how they could go about actually deducting PAYE. First off they would surely need your tax code / NI Number and all the other things you don't bother to collect when you a dealing with a PSC in a B2B relationship.

I am sure others on here are more rounded on where this could lead, but ultimately this could lead to all sorts of deemed employment issues.

Another perfect example of an agency in a panic when they don't understand the issue [prays that my compliance department hasn't sent this out]

[TheFaQQer]

Don't walk away. Run. Run away as fast as you can.

[Jubber]

I'd bin it.

+1

[cojak]

Oh Dear....

Are you working for a Public Sector client? See here if you are...

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

[stek]

I'd bin it.

[outsidein]

I'm very relieved that my interpretation of the request is mirrored by you.

I am unsure about naming the agency as I do not want to compromise any goodwill I can salvage from this situation.

So you can better understand my problem...

This is the main reason they provide:

In order to ensure full compliance with the legislation effective 6th April 2014, we now need to
undertake appropriate due diligence to confirm that all Suppliers of Services are operating
(and will continue to operate) as a Personal Service Company. Without this confirmation,
<AgentCo> must apply PAYE on all payments made after 6th April 2014.

(I have no idea how much they will retain for 'PAYE', nor where they intend to save it or how they plan to pay it to HMRC)

...this is the persuasion:

In order to ensure full compliance with the legislation effective 6th April 2014, we now need to
undertake appropriate due diligence to confirm that all Suppliers of Services are operating
(and will continue to operate) as a Personal Service Company. Without this confirmation,
<AgentCo> must apply PAYE on all payments made after 6th April 2014.
As part of this due diligence can you now please arrange for the attached undertaking to
be completed on behalf of <MyCo> Limited and signed by all Directors. One of the signatories
must be the Director and Majority Shareholder who is designated to perform the Services. To
ensure no delays to payments in April the completed Undertaking should be returned by 14th
April 2014.

(So i need to make my decision on this within 2 weeks - I'm not interested in doing so and I have no idea why I must be a majority shareholder)

...this is the clause in the indemnity (there are 5 in all, this 'subtle' one is the 4th) that concerns me the most:

The Supplier and the individual Directors personally jointly and severally indemnify
(and will continue to keep indemnified) both <AgentCo> and its Directors against any
claims by HMRC or any government body or fiscal authority for any sums required to
be paid in connection with the fees paid by <AgentCo> to the Supplier for the provision of
the Services. This includes any PAYE, Income Tax, National Insurance Contributions
and any other taxes or levies or penalties.

(The highlighting is theirs)

(The other clauses try to dictate the setup of the company and where the company's monies flow)

Thanks again for your positive feedback - it helps me a lot!

All advice appreciated - please keep it coming - I think I have quite a battle on my hands this week.