The Key Information Document (KID)
This was not referenced in the webinar because it does not specifically relate to the Off-Payroll Working changes. Nevertheless, a KID is an obligation on agencies to provide information about any deductions and fees to which agency workers – including via umbrellas – are subject.
The following link explains the rationale for the KID which was introduced in April 2020 and is designed to give a worker transparency about the deductions that will be made from the rate for the engagement.
There are examples of documents to be used to provide information to agency workers, workers paid by an umbrella and those workers providing their services via a PSC: https://www.gov.uk/government/publications/providing-a-key-information-document-for-agency-workers-guidance-for-employment-businesses
What is the position on indemnity clauses appearing in agency contracts with PSCs?
There were a small number of questions around this issue where the contract signed by your company has clauses which require the PSC to indemnify the agency for any unexpected bills in relation to the engagement, such as tax fines and penalties levied upon the agency.
This is a legal question rather than a tax matter, and the answer whether such clauses are enforceable may require parties going to court for a judgement – but these clauses are increasingly common.
As a limited company is deemed to be a sophisticated entity, then the issue of ‘duress’ which was raised by one attendee may not materialise, although a judge might wish to consider the bargaining power of the two parties.
There is also the question whether National Insurance liabilities can be passed on – many would argue that is not the case.
Finally, does an agency want to have the reputation of suing its candidates? Probably better for the agency to look to insure its fee payer liabilities – something Markel Tax can assist with. Call 0345 223 2727 for details.
Can I offset liability insurances against my personal tax?
If you are trading as a sole trader, then you can claim liability insurance as a legitimate business expense which would reduce your profits and therefore your tax bill.
Technically, under the expenses legislation, professional indemnity can be claimed against your personal tax liability if it is for the provision of your duties – an argument would be that end clients/agencies require it – but the rules are stringent – please follow this link to HMRC’s Employment Income Manual: EIM31630
HMRC would probably expect some form of apportionment between the cost to your company and you personally. Regrettably, we couldn’t find anything specific relating to claiming liability insurances and HMRC’s guidance in this area is not clear.
Contractors past retirement age
As noted by one contributor in his 70s, he does not pay employee’s NICs and so if an engagement is inside IR35 trading through his PSC, normal PAYE rules apply and there would be no deduction for Employee NICS.
However, there would still be Employers’ NICs and income tax to be deducted as well as potentially the apprenticeship levy.
Enquiry concluded; HMRC have stated that they won’t enquire for a further 3 years
This is the standard outcome of an HMRC IR35 enquiry and with HMRC’s focus on ensuring that end clients take reasonable care in arriving at status decisions and fee payers pay the correct tax based on those decisions, it is unlikely that many PSCs will be investigated (albeit HMRC are showing no inclination to cease ongoing enquiries into individual contractors).
Whilst we are not aware of an individual going through the mill more than once in terms of IR35; HMRC can strike in the same place more than once!
Moreover, if your PSC falls into the new rules where it will be the fee payer/client who will get the enquiry – will HMRC have the resources to check the PSC enquiries they have already done and link them to fee payer/client enquiries they are about to undertake? Possible but, unlikely.
For IR35 consultancy services please contact Markel Tax on 0345 223 2727.