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Previously on "New IR35 'Friendly' contract? Dodgy agents?"

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  • velcro
    replied
    Has anyone had any firm feedback from QDOS or the like on these contract clauses which try to shift IR35 liability?
    It'd be interesting if after signing one of these contracts, whether they would honour any IR35 insurance if there was an investigation. Might the underwriters say that you had invalidated any insurance in the event of an investigation? We all know that insurance companies will say/do anything to get out of paying up...

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  • SussexSeagull
    replied
    Originally posted by jamesbrown View Post

    As noted elsewhere in this thread, it moved the tax risk to the supply client, not the sum total of all risk, and HMRC only care about their taxes and penalties and everything else is just "commercial risk" to them (about which they know absolutely feck all). Now, as before, the supply chain can try to protect itself against tax loss. This is hardly a new thing and you can accept it or not and try to mitigate against it or not. As you say, if YourCo is gone, they can't do anything about it, unless the contract transfers the liability to you personally (watch out for that), but there are more short-term risks too (the approach they are taking to SDSs is fubared).
    As you say, it's worth noting the HMRC won't actually come after you instead of the end client due to anything put in a contract.

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  • jamesbrown
    replied
    Originally posted by SussexSeagull View Post
    Kind of surprised by the 'school of hard knocks' and 'what can you do about it' approach people are adopting. A change in the law moved the risk to the end client. Pain in the backside though it is, it is the will of the democratically elected government and shouldn't be overridden by a clause in a commercial contract.

    By tagging this onto a contract the risk is moving back to us giving us the worst of both worlds.

    No idea how enforceable it is but would be minded to wind down my Ltd after each Outside Contract if that was in the contract on the grounds they can't go after something that isn't there if there is an investigation years in the future.
    As noted elsewhere in this thread, it moved the tax risk to the supply client, not the sum total of all risk, and HMRC only care about their taxes and penalties and everything else is just "commercial risk" to them (about which they know absolutely feck all). Now, as before, the supply chain can try to protect itself against tax loss. This is hardly a new thing and you can accept it or not and try to mitigate against it or not. As you say, if YourCo is gone, they can't do anything about it, unless the contract transfers the liability to you personally (watch out for that), but there are more short-term risks too (the approach they are taking to SDSs is fubared).

    Leave a comment:


  • SussexSeagull
    replied
    Kind of surprised by the 'school of hard knocks' and 'what can you do about it' approach people are adopting. A change in the law moved the risk to the end client. Pain in the backside though it is, it is the will of the democratically elected government and shouldn't be overridden by a clause in a commercial contract.

    By tagging this onto a contract the risk is moving back to us giving us the worst of both worlds.

    No idea how enforceable it is but would be minded to wind down my Ltd after each Outside Contract if that was in the contract on the grounds they can't go after something that isn't there if there is an investigation years in the future.

    Leave a comment:


  • RobScott
    replied
    The agency is just trying to cover their risk. Dodgy? no. you can't have a cake and eat it too

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  • ShandyDrinker
    replied
    Originally posted by TwoWolves View Post
    HMRC don't understand what they are unleashing on the business community.
    On the contrary, HMRC understands exactly what they are unleashing on the business community.

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  • eek
    replied
    Originally posted by TwoWolves View Post
    I'm seeing a lot of this kind of hard-nosed contract wording flying about. Not really surprising given that everyone is now terrified of HMRC and their guidance is for the most part unworkable or unreasonable.

    If you are a consultant/expert nobody knows what you are going to do until you get into the thick of the problem anyway - that's why they hired you.

    In the end, IR35 is concerned with actual working practice and thus a lot of the contract is irrelevant or unenforceable. HMRC don't understand what they are unleashing on the business community.
    HMRC don't care - the issue (and fear) was the increasing use of PSC to avoid employing people and avoiding paying Employer NI.

    the new version of IR35 ticks that box - the fact the rest of it is utterly insane isn't a concern for the people in HMRC who are responsible for it is above their pay grade.

    Leave a comment:


  • SussexSeagull
    replied
    So in summary none of us actually know.

    Leave a comment:


  • TwoWolves
    replied
    I'm seeing a lot of this kind of hard-nosed contract wording flying about. Not really surprising given that everyone is now terrified of HMRC and their guidance is for the most part unworkable or unreasonable.

    If you are a consultant/expert nobody knows what you are going to do until you get into the thick of the problem anyway - that's why they hired you.

    In the end, IR35 is concerned with actual working practice and thus a lot of the contract is irrelevant or unenforceable. HMRC don't understand what they are unleashing on the business community.

    Leave a comment:


  • SteelyDan
    replied
    Originally posted by Paralytic View Post

    They did a blanket ban AND also issued an inside determination? Are you sure?
    Ah apologies, I see where you're going. I'll try & clarify; the organisation adopted the stance that all PSCs would be inside (yes, they'd still work with them but only on an 'inside' basis), and over-ruled the previously done outside SDS with the person's "line manager".

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  • Paralytic
    replied
    Originally posted by SteelyDan View Post
    The organisation over-ruled it & adopted a blanket ban on PSCs. He's now inside & with all the crap which could be potentially coming his way in due course, if he's very unlucky.
    They did a blanket ban AND also issued an inside determination? Are you sure?

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  • SteelyDan
    replied
    Originally posted by malvolio View Post
    I'll make the same point I made a while back when talking about when the SDS is run...


    That in most cases, especially BigCo client ones, the contractor and their line manager (you know what I mean) who know the working arrangements in reality, won't be the ones making the decision. So it's all a bit random anyway.

    That said, it's down to the contractor to nail these sorts of things at interview stage, not on joining.
    Indeed, and on this particular point I know of a recent situation where contractor (in post & on the run up to these changes), did the SDS with his "line manager", & was deemed outside. The organisation over-ruled it & adopted a blanket ban on PSCs. He's now inside & with all the crap which could be potentially coming his way in due course, if he's very unlucky.

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  • malvolio
    replied
    I'll make the same point I made a while back when talking about when the SDS is run...


    That in most cases, especially BigCo client ones, the contractor and their line manager (you know what I mean) who know the working arrangements in reality, won't be the ones making the decision. So it's all a bit random anyway.

    That said, it's down to the contractor to nail these sorts of things at interview stage, not on joining.

    Leave a comment:


  • BlasterBates
    replied
    Originally posted by SussexSeagull View Post

    I am not a legal expert in such matters - and if I was this hasn't been tested in court yet - but the point of the rule change is the end client are responsible. Can that be overruled in a contract?

    As we all know investigations can happen years after the event by which time the employee/worker/contractor could be long gone and the Limited company could have been legitimately dissolved. Not sure if the HMRC come knocking a clause in a contract is going to cause them too many sleepless nights in the quest for what they see as their money.
    The contract doesn't overrule the client's responsibility. HMRC will still litigate against the client, but it makes it explicitly clear that the client/agency can then recover it from the contractor if tax wasn't deducted when it should have been. In any case the personal tax liability of the contractor will have to be recalculated so he's going to be sucked into the dispute even without the contract clause.
    Last edited by BlasterBates; 29 March 2021, 13:33.

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  • jamesbrown
    replied
    Originally posted by SussexSeagull View Post

    I am not a legal expert in such matters - and if I was this hasn't been tested in court yet - but the point of the rule change is the end client are responsible. Can that be overruled in a contract?

    As we all know investigations can happen years after the event by which time the employee/worker/contractor could be long gone and the Limited company could have been legitimately dissolved. Not sure if the HMRC come knocking a clause in a contract is going to cause them too many sleepless nights in the quest for what they see as their money.
    In the first instance, no.

    In the first instance, the Fee Payer is liable for all taxes, penalties and interest due, absent fraud by another party, but anyone in the supply chain above the PSC may ultimately be found liable and pursued under the transfer of debt provisions, even in the absence of fraud.

    Bottom line, the supply chain above the PSC is going to pay out first and will then need to attempt to recover the money, if at all possible. HMRC only cares that they're covered, and this is why sensible clients will opt to avoid PSCs altogether.

    Contract clauses are very much downstream of that and whether those contract clauses will stick (in terms of recovering any money from the PSC) is very debatable.

    Leave a comment:

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