I used to draft "tax contest" letters that were part of commercial agreements.
These basically envisaged scenarios in which one party required the other to take certain actions, such as going to a FTT or UTT - at their own cost or perhaps at shared cost - in order to defend the tax effects that had been factored into the cost of the finance. (I worked in a bank).
In doing so, the start point was that following an initial enquiry from HMRC, the parties agreed that HMRC was incorrect or that there was at least a 75% chance of that.
So almost immediately we are into subjective tests. We, the bank, may decide that we had to challenge an adverse decision on the grounds that we perhaps had a book of similar deals using the same effect. Equally we might decide that the contract used a relatively little used device and that the reputation of the bank would suffer if we defended the situation, regardless of whether we thought we would win.
The other side of the deal would have had similar issues to weigh.
Even where matters of policy allowed consideration of taking or defending an enquiry, it was entirely possible that there were differing views as to the tax effect of a particular item under challenge. To try to provide some certainty (or to limit the areas of uncertainty), some tax issues were agreed between the parties in advance.
Especially noted were those areas in which bank and customer were responsible for the tax effects on their own book.
For example, the bank may consider that an asset was not a long life item (allowing faster tax depreciation) whereas the customer would usually consider it was a long life asset. That item would not be part of a tax contest. If that was challenged, it would be bank's sole decision and cost.
Why is this relevant?
Because you entered a contract and negotiated the terms and based on the role you did and the way it was documented, you made a decision about whether you were inside or outside IR35.
The end client had no say in that decision.
Why then would they be prepared to risk reputation and financial cost to join a defence or indemnify you for the costs of losing a decision that they have no say in?
I get that there may mitigating circumstances if the project if close to completion but are they enough for them to risk an open ended cost?
Would a charity - which benefits from generous tax breaks - really want to be in Tribunal admitting that it colluded with another in order to extract yet more tax advantage?
I wish you luck in attempting this, but don't be surprised if you are blanked.
These basically envisaged scenarios in which one party required the other to take certain actions, such as going to a FTT or UTT - at their own cost or perhaps at shared cost - in order to defend the tax effects that had been factored into the cost of the finance. (I worked in a bank).
In doing so, the start point was that following an initial enquiry from HMRC, the parties agreed that HMRC was incorrect or that there was at least a 75% chance of that.
So almost immediately we are into subjective tests. We, the bank, may decide that we had to challenge an adverse decision on the grounds that we perhaps had a book of similar deals using the same effect. Equally we might decide that the contract used a relatively little used device and that the reputation of the bank would suffer if we defended the situation, regardless of whether we thought we would win.
The other side of the deal would have had similar issues to weigh.
Even where matters of policy allowed consideration of taking or defending an enquiry, it was entirely possible that there were differing views as to the tax effect of a particular item under challenge. To try to provide some certainty (or to limit the areas of uncertainty), some tax issues were agreed between the parties in advance.
Especially noted were those areas in which bank and customer were responsible for the tax effects on their own book.
For example, the bank may consider that an asset was not a long life item (allowing faster tax depreciation) whereas the customer would usually consider it was a long life asset. That item would not be part of a tax contest. If that was challenged, it would be bank's sole decision and cost.
Why is this relevant?
Because you entered a contract and negotiated the terms and based on the role you did and the way it was documented, you made a decision about whether you were inside or outside IR35.
The end client had no say in that decision.
Why then would they be prepared to risk reputation and financial cost to join a defence or indemnify you for the costs of losing a decision that they have no say in?
I get that there may mitigating circumstances if the project if close to completion but are they enough for them to risk an open ended cost?
Would a charity - which benefits from generous tax breaks - really want to be in Tribunal admitting that it colluded with another in order to extract yet more tax advantage?
I wish you luck in attempting this, but don't be surprised if you are blanked.
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