Outside ir35 but HMRC tax liability clause added to contract Outside ir35 but HMRC tax liability clause added to contract
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  1. #1

    Default Outside ir35 but HMRC tax liability clause added to contract

    Hello, need advice on contract.

    In a situation where the company is trying to add a clause to be able to claim back any retrospective taxes, if later found inside ir35 by HMRC.

    So I am imagining a scenario where

    1) company states the contract is outside ir35.
    2) HMRC later states its inside
    3) company pays all dues
    4) tries to claim from me as per the contract clause.

  2. #2

    bored now

    eek's Avatar
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    Quote Originally Posted by michellebloomberg View Post
    Hello, need advice on contract.

    In a situation where the company is trying to add a clause to be able to claim back any retrospective taxes, if later found inside ir35 by HMRC.

    So I am imagining a scenario where

    1) company states the contract is outside ir35.
    2) HMRC later states its inside
    3) company pays all dues
    4) tries to claim from me as per the contract clause.
    So assuming we are talking about a new contract that extends beyond April and is outside IR35..

    1) Can you get the clause removed without losing the outside IR35 contract (NO).
    2) is the courts likely to see the clause as fair and valid (no because the law states who is responsible and why).

    I would live with it and ensure you keep evidence that you are working outside IR35..
    merely at clientco for the entertainment

  3. #3

    Still gathering requirements...


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    Quote Originally Posted by michellebloomberg View Post
    Hello, need advice on contract.

    In a situation where the company is trying to add a clause to be able to claim back any retrospective taxes, if later found inside ir35 by HMRC.

    So I am imagining a scenario where

    1) company states the contract is outside ir35.
    2) HMRC later states its inside
    3) company pays all dues
    4) tries to claim from me as per the contract clause.
    Would you consider yourself to be outside IR35?

    If so, then what difference is this to how it worked before?

    You always held liability until now, at worst you just end up how you were on the old rules, at best HMRC tells your client to go stick it and you get off scot free.

    Maybe you can get your client to sign up with QDOS and make £200 quid for a referral

  4. #4

    Contractor Among Contractors


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    Quote Originally Posted by eek View Post
    So assuming we are talking about a new contract that extends beyond April and is outside IR35..

    1) Can you get the clause removed without losing the outside IR35 contract (NO).
    2) is the courts likely to see the clause as fair and valid (no because the law states who is responsible and why).

    I would live with it and ensure you keep evidence that you are working outside IR35..
    Agreed with the above.

    Could the OP not also introduce the client to Qdos and their Never A Sleepless Night insurance package? Might thereby mitigate the need for clauses and the like...

    Having just called and spoken to Qdos about this very 'offering', I was told;

    1. The Outside IR35 insurance for clients is not yet a click and buy offering like it is for contractors.
    2. They are open for such client sales on a client-by-client basis.
    3. They already have a few such clients thus insured. I asked for names but the chap I spoke to did not know them as he is on the contractor side of insurance.
    4. It is something they are working on to have marketed to clients but are not there yet.

    So, in short, get your client to give them a call.

  5. #5

    Fingers like lightning


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    See if you can get it taken out. If not then contact a professional if you need advice.

    I would guess that it wouldn't be enforceable. They are incurring damages by their own cause through absolutely no fault of yours, how can they legally pass those damages onto you? They drafted the contract not you. They are creating the working conditions not you. The only way I could see this happening is if you were deemed to be at fault because you didn't operate to the terms of the contract essentially meaning they are operating in good faith producing working conditions and a contract sufficient to keep you outside. Then you do something to mimic an employer/employee relationship which results in the working conditions being deemed inside ir35 and you being at fault.

    But that's just a total guess, who the heck knows.

  6. #6

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    Quote Originally Posted by michellebloomberg View Post
    Hello, need advice on contract.

    In a situation where the company is trying to add a clause to be able to claim back any retrospective taxes, if later found inside ir35 by HMRC.

    So I am imagining a scenario where

    1) company states the contract is outside ir35.
    2) HMRC later states its inside
    3) company pays all dues
    4) tries to claim from me as per the contract clause.
    They can add the clause, but it's not enforceable as I understand. The only circumstance where they might be able to claim is if you've lied on the information they have used to determine a status.

  7. #7

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    1) While we are in discussion with them, the whole point of this clause is to advertise an outside ir35 contract, while passing on the risks of that determination on to the consultants. A few of those consultants will be ok to go inside ir35, but it looks like they dont want to lose the majority of others who will quit.

    2) As for enforceability, not sure a contract agreement takes precedence over HMRC rules.

    Just to draw a paralllel with The Tenant Fees Act 2019, where if a landlord puts in a clause in the contract to recover all fees from the tenant, will that be enforceable ? I don't think so.

    3) And to add to further complexity in these situations, for e.g. if I close down my limited commpany in a year or 2 and HMRC comes knocking after that. Where will the company recover the dues from as per the contract? it does look like someone hasn't thought this through.

    Thanks for all your replies. Much appreciated.

  8. #8

    Contractor Among Contractors


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    Quote Originally Posted by michellebloomberg View Post
    …. it does look like someone hasn't thought this through.
    There's an across-the-board running theme here...

  9. #9

    Should post faster


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    Quote Originally Posted by michellebloomberg View Post
    1)

    3) And to add to further complexity in these situations, for e.g. if I close down my limited commpany in a year or 2 and HMRC comes knocking after that. Where will the company recover the dues from as per the contract? it does look like someone hasn't thought this through.

    Thanks for all your replies. Much appreciated.
    Pre April 2020 - your house and any possessions you have (as it will extend to you the Director?) - if found inside when self declared outside.

    Post April 2020 (assuming you have a client SDS of being outside) - the end client / agency.

  10. #10

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    Quote Originally Posted by Andy Hallett View Post
    They can add the clause, but it's not enforceable as I understand. The only circumstance where they might be able to claim is if you've lied on the information they have used to determine a status.
    The counterargument then being the client failed to take "reasonable care" when looking into the information provided to them to make the determination...

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