'Outside IR35' Public Sector contract offered but can I rely on it?

[PartOfTheUnion]

I've been offered a contract through an agency at a government department end client. The contract is defined as 'outside IR35' and I'm very happy with that of course. I know the regulations place the liability for the status determination on the fee payer and so that should give me confidence that I can continue my normal salary/dividend split. However, what if there were a change of personnel or policy at the end client and 12 or 24 months in to the contract they revise the determination to 'inside IR35' (without changes in working practices)?

The agency has written clauses in their contract template that would require me, on being found inside IR35, to supply the services via an umbrella company and to bear liability for all tax implications of the change. This undermines further my confidence that the stated 'outside IR35' status can be relied upon. The full consequence of the client's representation of the contract as outside IR35 being inaccurate would fall on me and not the agency or client. I would certainly not continue with the contract if it were to be inside IR35 so I am challenging the umbrella clause, but I'm still concerned about historic payments at the time of a status change.

I don't want to let this opportunity slip through my fingers, but I need to have certainty about the status and also address the agency's legitimate concerns about bearing the impact of a change. I used to be able to get a contract reviewed and then insure myself against a later 'inside' finding - will any IR35 insurance cover me against the end-client's status determination being changed from outside to inside (and its impact on tax/penalties for payments made historically)?

[SteelyDan]

I've been offered a contract through an agency at a government department end client. The contract is defined as 'outside IR35' and I'm very happy with that of course. I know the regulations place the liability for the status determination on the fee payer and so that should give me confidence that I can continue my normal salary/dividend split. However, what if there were a change of personnel or policy at the end client and 12 or 24 months in to the contract they revise the determination to 'inside IR35' (without changes in working practices)?

The agency has written clauses in their contract template that would require me, on being found inside IR35, to supply the services via an umbrella company and to bear liability for all tax implications of the change. This undermines further my confidence that the stated 'outside IR35' status can be relied upon. The full consequence of the client's representation of the contract as outside IR35 being inaccurate would fall on me and not the agency or client. I would certainly not continue with the contract if it were to be inside IR35 so I am challenging the umbrella clause, but I'm still concerned about historic payments at the time of a status change.

I don't want to let this opportunity slip through my fingers, but I need to have certainty about the status and also address the agency's legitimate concerns about bearing the impact of a change. I used to be able to get a contract reviewed and then insure myself against a later 'inside' finding - will any IR35 insurance cover me against the end-client's status determination being changed from outside to inside (and its impact on tax/penalties for payments made historically)?

I'd be really careful with this.
I've had such a contract; deemed outside, it even passed the QDOS contract assessment, but the working practices were definitely inside.
I left after a week.

[northernladuk]

What is your engagement like? It should be SoW based but is it? Or is it like any other contract with daily rate, signed timesheet etc?

I thought the public sector had gotten on top of this with contractors coming through the right frameworks which requires and outside approach i.e. SoW driven and general bums on seats were inside. My client is certainly doing it right so the split is very clear. Outsides SoW, insides on day by day rate via brollies.

I did think the different frameworks made it impossible to get an outside status bum on seat or am i wrong thinking that?

If this is a bum on seat filling for perm type role that's outside I'd be a bit concerned as well.

[PartOfTheUnion]

What is your engagement like? It should be SoW based but is it? Or is it like any other contract with daily rate, signed timesheet etc?

I thought the public sector had gotten on top of this with contractors coming through the right frameworks which requires and outside approach i.e. SoW driven and general bums on seats were inside. My client is certainly doing it right so the split is very clear. Outsides SoW, insides on day by day rate via brollies.

I did think the different frameworks made it impossible to get an outside status bum on seat or am i wrong thinking that?

If this is a bum on seat filling for perm type role that's outside I'd be a bit concerned as well.

I haven't seen the details of the engagement yet, only the agency's contract template. I am guessing it will be daily rate but that's normal even in outside IR35 contracts. I'm trying not to be too cynical and bite off my nose to spite my face. I have to accept that the working practices would always have been something to control. I'd just like to be able to relax about the prospect of the client not sticking to its original IR35 status determination that attracted me to the work. I am already trying to get the problem clauses in the contract template removed in my case, but I understand why the agency doesn't want to carry the risk themselves. I was wondering what other options might be a compromise, hence my question about insurance. Would any insurer accept the risk of some arbitrary change of mind by an end client?

[Lance]

I'd be really careful with this.
I've had such a contract; deemed outside, it even passed the QDOS contract assessment, but the working practices were definitely inside.
I left after a week.

but so what. It's public sector so their liability.
If they change the terms later on you can walk, or stay with impunity.

[northernladuk]

but so what. It's public sector so their liability.
If they change the terms later on you can walk, or stay with impunity.

I see what you are saying but we are in to the realms of the unknown here. That's the theory but when has that ever meant anything with IR35? It only takes one court case or one policy turn around and then you've got a massive risk. Working in that situation feels wrong and for me and just saying it's not my problem isn't enough for me to sleep well.

The question is what other options do you have? 18 months ago with enough gigs around then I'd be happy to drop this one like a stone. Now? I dunno.

Doesn't feel right for now.

[PartOfTheUnion]

but so what. It's public sector so their liability.
If they change the terms later on you can walk, or stay with impunity.

Yes I realise that I could walk away but there remains the problem of the contract clause that passes through the agency's liability for additional taxes and penalties on to me, which I am assuming would be retrospectively applied to the whole contract so far. That's the part I am trying to insure against. I have confirmed with QDOS that this clause is untested in law and that their insurance would not cover it.

[SteelyDan]

but so what. It's public sector so their liability.
If they change the terms later on you can walk, or stay with impunity.

But what if the agent is one of those MSC-set-ups, where your deemed outside contract is with them, and they have a milestone delivery contract with the pub sec end client?
Where does the liability sit then?

[malvolio]

Yes I realise that I could walk away but there remains the problem of the contract clause that passes through the agency's liability for additional taxes and penalties on to me, which I am assuming would be retrospectively applied to the whole contract so far. That's the part I am trying to insure against. I have confirmed with QDOS that this clause is untested in law and that their insurance would not cover it.

Under section 10 rules (the new version of IR35 that the PS are already using) the liability resets with the client or the paying agency. It does not and will not rest with you. If the gig moves back inside IR35 - which is unlikely since the client presumably understands the rules properly - then it's their problem to pay the taxes that they should have been deducting from the beginning.

On that basis a clause transferring that liability to you is likely unenforceable, unless of course you agree to it happening. However they could then claim you had been overpaid and ask for the balance back. Which ends up with the same dilemma.

Personally I'd walk away, or at least call the agency's bluff. However I (and most everyone else on here) are not contract lawyers. I should get qualified advice from someone who understands the entirety of contracts

[Lance]

But what if the agent is one of those MSC-set-ups, where your deemed outside contract is with them, and they have a milestone delivery contract with the pub sec end client?
Where does the liability sit then?

then ask for an SDS. If it comes from the agency rather than the client you know it's dodgy.
If it comes from the client.. crack on.