Reply to: Outside role

[Cookielove]

Thanks Eek and Jamesbrown !

[eek]

Hmmm what a muddle. Rightly or wrongly I assumed if a client makes an outside determination then there is no risk that the contractor can find themselves on the hook for taxes ...as they had no part in the decision whatsoever ...simple as that...if there is an SDS done and contract states role is outside IR35 surely the contractor can’t take the hit if client got it wrong...that’s common sense ...if they can then it’s very difficult to see where you can take an outside role workout this potentially happening albeit you had no say in the determination....I get it that HMRC would want the taxes if it’s wrong and they don’t care who’s pocket that comes out of...hey ho! Maybe permie looking a better option ....☺️

There is 1 other thing to point out.

You are posting a question on a forum where 2 posters (JamesBrown and me) are more aware of the situation than probably anywhere else who hasn't made IR35 their full time job (and even then I suspect I know more than most full time IR35 "experts" when it comes to this niche area).

So the chances are that an outside IR35 contract really won't have any issues but you need to go in with your eyes open:-

1) Ensure you have a SDS determination that says outside
2) ensure you keep the contract outside by operating as a consultant / specialist not an employee. Remember to emphasis that it's in the interest of the client that you don't do XYZ if pushed to do things that make you into an employee.
3) Don't go mad and spend every penny...

And an inside IR35 contract isn't a big disaster - use them to top the pension up - the only issue is if every contract you get is inside IR35 and you have little savings.

[eek]

Supply chains are clearly under the impression that clawback clauses are important and will work (I think they're optimistic, but we'll see).

There needs to be someone with the cash available to ensure the first (sane, winnable) cases as far as possible to ensure the clauses are 100% shown to be illegal. My biggest concern is that the only people who may be in a position to fund such a case is IPSE and I don't think they have the money left to be able to do so (or worse won't support any early case for someone who isn't already a member).

Otherwise we will be left in a situation like being outside Agency Regulations where no one has a clue if they really are or not and agencies use that grey area to continue to abuse things.

Remember one reason why Agencies love umbrellas is because it allows them to claim to be outside the regulations which they cannot do if you are on agency payroll.

[jamesbrown]

Hmmm what a muddle. Rightly or wrongly I assumed if a client makes an outside determination then there is no risk that the contractor can find themselves on the hook for taxes ...as they had no part in the decision whatsoever ...simple as that...if there is an SDS done and contract states role is outside IR35 surely the contractor can’t take the hit if client got it wrong...that’s common sense ...if they can then it’s very difficult to see where you can take an outside role workout this potentially happening albeit you had no say in the determination....I get it that HMRC would want the taxes if it’s wrong and they don’t care who’s pocket that comes out of...hey ho! Maybe permie looking a better option ....☺️

Absent fraud, Chapter 10 envisaged that the supply chain above YourCo would pay - the Fee Payer by default, else the last link in the chain that failed its responsibility - so your assumption is not a terrible one. However, it's not the first time that HMRC has adopted a "novel" interpretation of the legislation that underpins their enforcement. At the same time, there's little incentive for HRMC to care about fights among suppliers, and there's an enormous incentive for the Fee Payer to pass down the liability if they can possibly get away with it (as eek says, this will be an extinction level event for small agencies and/or agencies with multiple similar roles at the client).

It will take a while for the dust to settle on this one, but the more the can is opened, the more worms appear, so don't start without an SDS from the client (it's their responsibility to pass this to you directly) and nail your contractual terms because that's about all you can control (other than choosing an umbrella). Supply chains are clearly under the impression that clawback clauses are important and will work (I think they're optimistic, but we'll see).

[Lance]

They [government] couldn’t care less about supply chain issues,

This fact has been proven recently on more than just IR35. Don't expect any changes or sympathy from HMG based on anything other than political dogma.

[Cookielove]

Hmmm what a muddle. Rightly or wrongly I assumed if a client makes an outside determination then there is no risk that the contractor can find themselves on the hook for taxes ...as they had no part in the decision whatsoever ...simple as that...if there is an SDS done and contract states role is outside IR35 surely the contractor can’t take the hit if client got it wrong...that’s common sense ...if they can then it’s very difficult to see where you can take an outside role workout this potentially happening albeit you had no say in the determination....I get it that HMRC would want the taxes if it’s wrong and they don’t care who’s pocket that comes out of...hey ho! Maybe permie looking a better option ....☺️

[eek]

I don’t see how I could be liable for repaying any taxes as I’ve had nothing to do with the determination. That is solely the client deciding. Agency touting the role as outside. If client gives an outside SDS then surely that’s it the onus is on them...how can I be liable as I’ve had zip all to do with it ....surely if clients get to wrong contactless can’t in the frame that makes no sense to me...

What has your inability to see have to do with an agency passing a bankruptcy level event on to anyone who isn't the agency.

Remember the scenarios you need to watch out for are:-

1) Agency assumes contract is outside IR35 without seeing the actual SDS determination on paper.
2) "Agency appeals" outside IR35 determination and an inside determination is given prior to the client making the first payment.

3) HMRC decides that the contract is inside IR35, chasing payment from the fee payer (agency) who then chases you for the money.

As for James Brown's argument - while I wouldn't be willing to sign a contract that has clawback clauses I can see a scenario where an agency / the liquidator of an agency could try to pass the bill back to the contractor either via court or via HMRC (in the latter case that seems to be how the agency is trying to play it). Just because a contract doesn't have explicit claw back clauses in it, I wouldn't trust them to not try and argue there is an implicit clause.

[jamesbrown]

If contractors are going to be liable for a clients decision what’s the point...we are fall guys either way ?. As I said won’t proceed til a definitive answer and SDS, I suspect agency may be misleading people advertising it as outside ...we’ll see...

What’s the point for whom? The point for gov’t is that they get the tax owed. They couldn’t care less about supply chain issues, as long as someone pays. It’s tough out there unless you have leverage and use it during the contract negotiation.

[Cookielove]

If contractors are going to be liable for a clients decision what’s the point...we are fall guys either way ?. As I said won’t proceed til a definitive answer and SDS, I suspect agency may be misleading people advertising it as outside ...we’ll see...

[jamesbrown]

I don’t see how I could be liable for repaying any taxes as I’ve had nothing to do with the determination. That is solely the client deciding. Agency touting the role as outside. If client gives an outside SDS then surely that’s it the onus is on them...how can I be liable as I’ve had zip all to do with it ....surely if clients get to wrong contactless can’t in the frame that makes no sense to me...

Think about it this way. When an employer makes a mistake with PAYE, they can legitimately correct that mistake and ask the employee for any underpaid tax. It is apparently HMRC’s opinion that a similar situation applies to any reversal of an SDS in the context of Chapter 10. There are at least two problems with this argument, however. First, that was not intended by Chapter 10. Second, there is an intermediary contract, not an employment contract. This is why it’s imperative that you never sign a contract that contains any clauses that purport to transfer liability for underpaid tax. For contracts that do contain such clauses, we’ll see what happens, but they could succeed.

[Cookielove]

It’s not at that stage yet, no contracts as agency waiting on client to do the determination. Job advertised as outside, agency waiting on confirmation....

[Cookielove]

I won’t proceed until it’s decided either way. Surely if a client gives an outside IR35 determination and it’s mentioned in the contract as outside there can be no come back on the individual...?

[malvolio]

I don’t see how I could be liable for repaying any taxes as I’ve had nothing to do with the determination. That is solely the client deciding. Agency touting the role as outside. If client gives an outside SDS then surely that’s it the onus is on them...how can I be liable as I’ve had zip all to do with it ....surely if clients get to wrong contactless can’t in the frame that makes no sense to me...

Have you had a careful read of your contract? Sure there's nothing in their about covering incidental losses up the contractual chain?

[Cookielove]

Contractors not contactless ! Predictive text ?

[Cookielove]

I don’t see how I could be liable for repaying any taxes as I’ve had nothing to do with the determination. That is solely the client deciding. Agency touting the role as outside. If client gives an outside SDS then surely that’s it the onus is on them...how can I be liable as I’ve had zip all to do with it ....surely if clients get to wrong contactless can’t in the frame that makes no sense to me...