Reply to: Autumn Statement

[Waldorf]

Just thinking out loud...which is often a bad idea...

But what if I had a contract which indemnified the client from the associated liabilities, along the lines of - if client Co is investigated and found liable, all outstanding taxes in relation to the contract can be claimed from myCo

Is that viable?

An indemnity from a PSC would be worth the paper it was written on.

[suityou01]

Precisely. Trying to boil the frog too quickly. We just need a few people in high places to cotton on what this means for businesses bottom line and this will fold.

Businesses have to engage consultancies instead of contractors. Their bottom line is hit hard. Consultancies do well. PI firms go bust. Mass layoffs of permies. Greater unemployment. Bad news for call me Dave.

Just think it through. This cannot and will not go through as is, or the tulip will hit the fan.

[jamesbrown]

Is that viable?

It depends. The leaked information pointed to an MSC-style debt transfer provision. As long as HMRC have the ability to collect from anywhere in the chain, a liability remains on everyone in the chain. As a minimum, some form of insurance policy would be required (a tiny YourCo is hardly any insurance), but this would not eliminate all risk for a client. I could envisage this working in some cases if the client were completely onside w/r to the outcomes of any ESI test.

[LisaContractorUmbrella]

Just thinking out loud...which is often a bad idea...

But what if I had a contract which indemnified the client from the associated liabilities, along the lines of - if client Co is investigated and found liable, all outstanding taxes in relation to the contract can be claimed from myCo

Is that viable?

It will all depend on how everything is worded and who holds the responsibility for making the determination - if it's the end client then I'm not sure an indemnity would work

[Danglekt]

As is currently the case for IR35. In the absence of a statutory employment test, SDC will be interpreted in much the same way as D&C is currently interpreted (with emphasis on the "how" in all likelihood). The primary risk won't be in a tax tribunal finding against you in terms of SDC (any more than currently applies for D&C or the right thereof), but it will render RoS and MoO invalid. Rather, the primary risk will be on the role of the client in judging whether SDC applies and any associated liability. So the details of the test could be more or less important depending on the role of the client and any associated liabilities.

Just thinking out loud...which is often a bad idea...

But what if I had a contract which indemnified the client from the associated liabilities, along the lines of - if client Co is investigated and found liable, all outstanding taxes in relation to the contract can be claimed from myCo

Is that viable?

[SueEllen]

Definitely that (and any deferral is good news), but there's perhaps a slim chance Gideon will slip back into "listening mode". I assume they delayed because the representations made, largely in response to the newspaper articles rather than the discussion and consultation, were sufficient to provide some cause for concern, whether about Gov't departments or something else. I see they're aiming to reduce the use of contractors in the public sector by 20%. As you say, definitely a deferral, but there's hope it may be more; we should know in a few weeks (just a guess) when the IR35 consultation is published.

They have been trying to reduce the use of contractors in the public sector since Blair was in government.

The fact that they have no idea how do employment contracts to prevent those they train and skill up from leaving, and pay them poorly means they will never get the skilled staff they need regardless of the field.

[supersteamer]

Working away during the week could now add many extra thousands to your potential liability for a genuine mistake on IR35 above what was already the case. Given the haze of subjective wooliness of SDC/IR35 there is no way most can ever be sure this won't hit them (possibly years later).

I wonder if (a) HMRC will start focusing IR35 investigations on well travelled LTDs with large T&S claims as they will now be even riper fruit, and (b) will IR35 insurance providers extend tax loss coverage to retrospectively disallowed T&S?

Guess we'll have to see what happens on the 9th.

[jamesbrown]

I think all that's been avoided is seeing this come in by April 2016, when in reality there was probably little prospect of this anyway, but the T&S changes, which will be effective as of then, all but confirm they will be making bigger changes later down the line.

Definitely that (and any deferral is good news), but there's perhaps a slim chance Gideon will slip back into "listening mode". I assume they delayed because the representations made, largely in response to the newspaper articles rather than the discussion and consultation, were sufficient to provide some cause for concern, whether about Gov't departments or something else. I see they're aiming to reduce the use of contractors in the public sector by 20%. As you say, definitely a deferral, but there's hope it may be more; we should know in a few weeks (just a guess) when the IR35 consultation is published.

[Zero Liability]

I think all that's been avoided is seeing this come in by April 2016, when in reality there was probably little prospect of this anyway, but the T&S changes, which will be effective as of then, all but confirm they will be making bigger changes later down the line.

[jamesbrown]

The big issue is how they are going to implement the SDC test. We got legal opinion on the proposal which said SDC could be argued either way as there is no true definition....

As is currently the case for IR35. In the absence of a statutory employment test, SDC will be interpreted in much the same way as D&C is currently interpreted (with emphasis on the "how" in all likelihood). The primary risk won't be in a tax tribunal finding against you in terms of SDC (any more than currently applies for D&C or the right thereof), but it will render RoS and MoO invalid. Rather, the primary risk will be on the role of the client in judging whether SDC applies and any associated liability. So the details of the test could be more or less important depending on the role of the client and any associated liabilities.

[lucyclarityumbrella]

No, not at all. Does IR35 require a definition of a PSC? There will be no legal definition of a PSC forthcoming. It will be no more complicated than enforcing IR35, i.e. caught = no T&S relief (on a contract-by-contract basis). This will continue to apply when IR35 is reformed.

The big issue is how they are going to implement the SDC test. We got legal opinion on the proposal which said SDC could be argued either way as there is no true definition....

[jamesbrown]

Well if they don't define it, wouldn't it be rather hard to enforce?

No, not at all. Does IR35 require a definition of a PSC? There will be no legal definition of a PSC forthcoming. It will be no more complicated than enforcing IR35, i.e. caught = no T&S relief (on a contract-by-contract basis). This will continue to apply when IR35 is reformed.

[lucyclarityumbrella]

Well if they don't define it, wouldn't it be rather hard to enforce?

A bit like the definition of SDC, all a mystery it seems even to the people with the power!

[jpdw]

I think that might be wishful thinking! Hopefully the 9th will shed some light on it all.

Well if they don't define it, wouldn't it be rather hard to enforce?

[WordIsBond]

So a legal definition of a PSC will be forthcoming.....?

LOL. If they could figure out how to do that, without catching people they don't want to catch, it would have been done years ago, and IR35 would have been replaced with something workable.