Originally posted by webberg
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Call me suspicious or say that once bitten is twice shy, but it's worth thinking about the motives of the parties here.
For public sector jobs (and in 2020 of course private sector - does the contract under review go beyond April 2020?) the sequence of decisions/events should be:
End client makes a decision as to inside or outside the scope of IR35.
Clearly an "inside IR35" decision means that they become liable for employers NIC.
There is a debate raging about where that particular liability sits but legally it's with the engager/end user and you as the contractor are not liable.
There is no doubt a debate about how the day rate in impacted and this brings in the agent.
In tax parlance, this is probably the "fee payer". This means that if the end user has decided on an inside IR35 status, the fee payer is responsible for paying over tax, em'ee and em'er NIC.
So, clearly the fee payer is more inclined to persuade the end user for an outside IR35 decision as this leaves more headroom in the day rate for fees etc.
Unless of course, the day rate is grossed down from the headline rate, less tax, NI (x2), fees etc.
In the event hat the decision is "outside IR35" and is found to be wrong - remember that you can and always should ask these parties for a note of how they have arrived at their decision - then the fee payer is liable.
Be clear. This is not the contractor liability.
Therefore we have seen contracts where the potential liability is basically passed through the contract chain to the contractor.
I'm not lawyer enough to know if these clauses can be made to stick, but I suspect that they have had the advantage of some good legal minds.
So end user and fee payer are probably on a good thing here. They are both strongly motivated to go for an outside IR35 status, knowing that should there subsequently be a manure/ventilation interface, it's likely to cost them nothing except their reputation.
The end user won't mind, because no contractor likes to upset the end user. The fee payer may mind more but given the size of the market and if all of them are doing the same, the contractor choice is then frying pan or fire.
There needs to be a drive towards two things.
First, contractor fees need to be driven in a "net up" fashion. How much do you want for the job, accepting that the amount will be subject to tax and em'ee NIC? Once you've decided how much you are worth, gross that amount for em'er NIC and fees and that is what the end user pays.
If the end user baulks at that (not the fee payer as they should be neutral in this), there is a negotiation to be had.
Second, the black boxes operated by some fee payers have to be opened to the harsh light of audit. If contractors continue to assume that the black box operates in their favour and ask no questions, they have only themselves to blame.
We predict the rise of new models in the market and the existing players will be forced to adapt or die.
For public sector jobs (and in 2020 of course private sector - does the contract under review go beyond April 2020?) the sequence of decisions/events should be:
End client makes a decision as to inside or outside the scope of IR35.
Clearly an "inside IR35" decision means that they become liable for employers NIC.
There is a debate raging about where that particular liability sits but legally it's with the engager/end user and you as the contractor are not liable.
There is no doubt a debate about how the day rate in impacted and this brings in the agent.
In tax parlance, this is probably the "fee payer". This means that if the end user has decided on an inside IR35 status, the fee payer is responsible for paying over tax, em'ee and em'er NIC.
So, clearly the fee payer is more inclined to persuade the end user for an outside IR35 decision as this leaves more headroom in the day rate for fees etc.
Unless of course, the day rate is grossed down from the headline rate, less tax, NI (x2), fees etc.
In the event hat the decision is "outside IR35" and is found to be wrong - remember that you can and always should ask these parties for a note of how they have arrived at their decision - then the fee payer is liable.
Be clear. This is not the contractor liability.
Therefore we have seen contracts where the potential liability is basically passed through the contract chain to the contractor.
I'm not lawyer enough to know if these clauses can be made to stick, but I suspect that they have had the advantage of some good legal minds.
So end user and fee payer are probably on a good thing here. They are both strongly motivated to go for an outside IR35 status, knowing that should there subsequently be a manure/ventilation interface, it's likely to cost them nothing except their reputation.
The end user won't mind, because no contractor likes to upset the end user. The fee payer may mind more but given the size of the market and if all of them are doing the same, the contractor choice is then frying pan or fire.
There needs to be a drive towards two things.
First, contractor fees need to be driven in a "net up" fashion. How much do you want for the job, accepting that the amount will be subject to tax and em'ee NIC? Once you've decided how much you are worth, gross that amount for em'er NIC and fees and that is what the end user pays.
If the end user baulks at that (not the fee payer as they should be neutral in this), there is a negotiation to be had.
Second, the black boxes operated by some fee payers have to be opened to the harsh light of audit. If contractors continue to assume that the black box operates in their favour and ask no questions, they have only themselves to blame.
We predict the rise of new models in the market and the existing players will be forced to adapt or die.
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