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> UK contractors take home less now than they did 5 years ago due to taxation changes (IR35). The way I've seen this go with companies that care about their co

by lol768 4y ago

> UK contractors take home less now than they did 5 years ago due to taxation changes (IR35). The way I've seen this go with companies that care about their contractor workforce is that assignments and their working practices are thoroughly checked to ensure they remain outside IR35, so the take-home is just as good as it used to be. Some contracts I've seen involve a liability shift clause from the agency/client to the contractor's Ltd co - and the client will often insist that you have fee-payer/agency IR35 insurance in place to protect the supply chain (Kingsbridge sell this sort of product) if such a clause is in place. You need to be in an in-demand role and present enough value to be able to demand this though and avoid blanket 'inside' determinations. Of course, if you continue supplying small companies, it remains the contractor's liability.

Silhouette 4y ago
Some contracts I've seen involve a liability shift clause from the agency/client to the contractor's Ltd co - and the client will often insist that you have fee-payer/agency IR35 insurance in place to protect the supply chain (Kingsbridge sell this sort of product) if such a clause is in place. Yes that's definitely happening. However this practice is on the radar of the relevant authorities and hasn't yet been tested in court/tribunal settings. It's clearly trying to circumvent the spirit of the rules by shifting responsibility that is now explicitly intended to rest with the client or intermediaries onto the contractor themselves. That may be unfair particularly if the client or intermediaries are also writing the contract and specifying the required working arrangements for an engagement as is often the case for contract work. It seems likely that a test case will happen before long. The resulting decision may be of the form "LOL nice try Mr Agency now pay up". As with so much in this area the real problem is that no-one knows for sure. That creates a chilling effect across the whole industry and of course the larger parties with the bigger legal budgets have a natural advantage there.
- lol768 4y ago
  I don't like it, and it's clearly not within the spirit of the rules (I'd rather the agency/end-client just paid Qdos for their own fee-payer insurance) but if it just creates a civil liability, I'm not sure I can see why it wouldn't be enforceable. The agency would have to pay up first, but then could presumably pursue the Ltd co afterwards.
  - Silhouette 4y ago
    I'm not a lawyer but from my understanding the attack would be on general principles: contractual provisions can't override statute law in our system, any contract has to meet certain basic standards to be enforceable, and if a contract isn't genuinely negotiated but rather dictated by the more powerful party (aka contracts of adhesion or standard form contracts) any later decisions about interpretation are likely to favour the little guy. In the case of employment there are lots of specific statutory provisions to protect employees but contractors don't enjoy the same protections automatically so again we're back to unfortunate levels of ambiguity until precedents from real cases start to clarify the situation.
    - varispeed 4y ago
      This is not against the spirit of the law. The deemed employer is suppose to pay tax at source _on_behalf_ of deemed employee. So, if someone has been found to be in fact in scope of IR35 and now the Fee Payer has to pay the tax - this is the tax _on_behalf_ of the deemed employee. They can legally and ethically claim it back from the resource, because this is _their_ personal tax. The grey area could be the fine itself. Then you have the mess when resource's company already paid Corporation Tax, Dividend Tax and other taxes. Good luck for any accountant to do the reconciliation. This legislation is completely botched and cares only about the happy path, where everyone works in scope of IR35. That's why it had a huge chilling effect across industry, as companies don't want to take the risk and simply write contracts in a way that they will be firmly in scope or just tell the resource to abandon their company and join unregulated umbrella and become their employee.
      - Silhouette 4y ago
        Every one of those clauses that I've seen or heard about also tried to make the contractor liable for all of the employer obligations: Employer NI, Apprenticeship Levy if applicable, and usually some blanket term that covers any other expenses they incur dealing with it. That is most definitely not in the spirit of the law. Paying the personal taxes is obviously a different matter. Even then it's usually the client side who are establishing the working arrangements and responsible for making the determination so I'm still not sure about the ethics of retrospectively hitting the contractor with a huge extra tax bill later if that determination is found to be wrong. In many cases the contractor presumably wouldn't have taken the role in the first place if the client had got their side right so I feel like it should probably be the client's responsibility to insure against any later adverse decisions if they want to in this situation. You'll certainly find that when it's the other way around with a small business client any intermediaries will be quick to include an indemnity clause in their standard contract that leaves the contractor on the hook for all costs on both sides if they make the wrong determination.

by lol768 4y ago

Silhouette 4y ago

Some contracts I've seen involve a liability shift clause from the agency/client to the contractor's Ltd co - and the client will often insist that you have fee-payer/agency IR35 insurance in place to protect the supply chain (Kingsbridge sell this sort of product) if such a clause is in place. Yes that's definitely happening. However this practice is on the radar of the relevant authorities and hasn't yet been tested in court/tribunal settings. It's clearly trying to circumvent the spirit of the rules by shifting responsibility that is now explicitly intended to rest with the client or intermediaries onto the contractor themselves. That may be unfair particularly if the client or intermediaries are also writing the contract and specifying the required working arrangements for an engagement as is often the case for contract work. It seems likely that a test case will happen before long. The resulting decision may be of the form "LOL nice try Mr Agency now pay up". As with so much in this area the real problem is that no-one knows for sure. That creates a chilling effect across the whole industry and of course the larger parties with the bigger legal budgets have a natural advantage there.

lol768 4y ago
I don't like it, and it's clearly not within the spirit of the rules (I'd rather the agency/end-client just paid Qdos for their own fee-payer insurance) but if it just creates a civil liability, I'm not sure I can see why it wouldn't be enforceable. The agency would have to pay up first, but then could presumably pursue the Ltd co afterwards.
- Silhouette 4y ago
  I'm not a lawyer but from my understanding the attack would be on general principles: contractual provisions can't override statute law in our system, any contract has to meet certain basic standards to be enforceable, and if a contract isn't genuinely negotiated but rather dictated by the more powerful party (aka contracts of adhesion or standard form contracts) any later decisions about interpretation are likely to favour the little guy. In the case of employment there are lots of specific statutory provisions to protect employees but contractors don't enjoy the same protections automatically so again we're back to unfortunate levels of ambiguity until precedents from real cases start to clarify the situation.
  - varispeed 4y ago
    This is not against the spirit of the law. The deemed employer is suppose to pay tax at source _on_behalf_ of deemed employee. So, if someone has been found to be in fact in scope of IR35 and now the Fee Payer has to pay the tax - this is the tax _on_behalf_ of the deemed employee. They can legally and ethically claim it back from the resource, because this is _their_ personal tax. The grey area could be the fine itself. Then you have the mess when resource's company already paid Corporation Tax, Dividend Tax and other taxes. Good luck for any accountant to do the reconciliation. This legislation is completely botched and cares only about the happy path, where everyone works in scope of IR35. That's why it had a huge chilling effect across industry, as companies don't want to take the risk and simply write contracts in a way that they will be firmly in scope or just tell the resource to abandon their company and join unregulated umbrella and become their employee.
    - Silhouette 4y ago
      Every one of those clauses that I've seen or heard about also tried to make the contractor liable for all of the employer obligations: Employer NI, Apprenticeship Levy if applicable, and usually some blanket term that covers any other expenses they incur dealing with it. That is most definitely not in the spirit of the law. Paying the personal taxes is obviously a different matter. Even then it's usually the client side who are establishing the working arrangements and responsible for making the determination so I'm still not sure about the ethics of retrospectively hitting the contractor with a huge extra tax bill later if that determination is found to be wrong. In many cases the contractor presumably wouldn't have taken the role in the first place if the client had got their side right so I feel like it should probably be the client's responsibility to insure against any later adverse decisions if they want to in this situation. You'll certainly find that when it's the other way around with a small business client any intermediaries will be quick to include an indemnity clause in their standard contract that leaves the contractor on the hook for all costs on both sides if they make the wrong determination.