Is anyone using a contrived agency contract?

[TheCyclingProgrammer]

Some clarification:

https://www.pcg.org.uk/news-events/n...employment-pcg

Consultation:

https://www.gov.uk/government/consul...elf-employment

Finance bill proposals:

https://www.gov.uk/government/upload...rmediaries.pdf

Short version: the requirement for "personal service" or an obligation to provide personal service will be removed from the requirements for agencies to be considered as employers, thus nullifying the "right of substitution" get out clause that agencies had previously relied on.

The scope of this change only applies to agency legislation. It shouldn't apply to us but there is interaction with IR35 - see p16 of the consultation. I do find it interesting to note that for agency workers, it shifts the test for self employment away from right of substitution and more towards direction and control.

Reading the consultation it seems to me that the government are taking reasonable steps to counter what seems like quite an unfair practice that facilitates tax avoidance and strips away workers rights.

[GazCol]

Some clarification:

https://www.pcg.org.uk/news-events/n...employment-pcg

Consultation:

https://www.gov.uk/government/consul...elf-employment

Finance bill proposals:

https://www.gov.uk/government/upload...rmediaries.pdf

Short version: the requirement for "personal service" or an obligation to provide personal service will be removed from the requirements for agencies to be considered as employers, thus nullifying the "right of substitution" get out clause that agencies had previously relied on.

The scope of this change only applies to agency legislation. It shouldn't apply to us but there is interaction with IR35 - see p16 of the consultation. I do find it interesting to note that for agency workers, it shifts the test for self employment away from right of substitution and more towards direction and control.

Reading the consultation it seems to me that the government are taking reasonable steps to counter what seems like quite an unfair practice that facilitates tax avoidance and strips away workers rights.

It’s a huge step in the right direction – direction and control needs much more emphasis than right of substitution as that, in my opinion at least, is a far bigger pointer towards disguised employment or not.

Now, if only HMRC would target all parties to the contract for IR35 (recouping lost Employer’s NI from who they’ve just deemed to be the employee, has to be up there with one of the biggest contradictions in UK tax law) rather than just the contractor that would be great.

[GazCol]

That's not my interpretation of that case. The working hours that he was required to do were used as a pointer towards control and there was also a MOO issue.

The case wasn't fought to the bitter end though so we don't know how it would have gone if it had.

You've still not shown any strong evidence of a lack of RoS being an automatic IR35 fail and if you're going to make such claims I feel you should back then up.

I hope Lisa's company doesn't advertise for business using this.

[TheCyclingProgrammer]

It’s a huge step in the right direction – direction and control needs much more emphasis than right of substitution as that, in my opinion at least, is a far bigger pointer towards disguised employment or not.
.

I completely agree. I've always found the emphasis on RoS a little odd because I believe for most of us there is generally an element of personal service - the clue is in the name personal service company. I also wonder how many clients would honor a substitution clause as if they wouldn't its worthless. That in itself should not make us disguised employees. To me control is also a far better indicator, but also MOO.

I wonder if this change might influence HMRC's approach when looking at IR35 cases too, although as much as they'd like a RoS clause that hasn't be used to be nothing more than a weak pointer to self employment, unless they can show the clause is a sham, case law isn't on their side on that front.

That's not to say that this might change in the future and those relying solely on a RoS clause to put them outside of IR35 may want to start shoring up their other working practices IMO.

After all, is a PSC contractor who for all intents and purposes looks and acts like an employee (under client control, not working on a specific project, part and parcel of the organisation etc.) but who has an unfettered RoS clause really any different from the fake "self employed" agency workers that this updated legislation seeks to tackle?

[LisaContractorUmbrella]

I hope Lisa's company doesn't advertise for business using this.

The views expressed on this website do not necessarily reflect the views of ContractorUmbrella. Other umbrella companies are available.

[malvolio]

RoS is important because it is embedded in case law as an indicator to non-employment from the original Ready Mix Concrete case that underpins the whole debate about who is and isn't an employee. It's not going to go away since any judgement that attempts to set it aside can be appealed.


And it's the "right" to do it, not the practicality of it, that is the key element. Employees can't send subbies.

[LisaContractorUmbrella]

RoS is important because it is embedded in case law as an indicator to non-employment from the original Ready Mix Concrete case that underpins the whole debate about who is and isn't an employee. It's not going to go away since any judgement that attempts to set it aside can be appealed.


And it's the "right" to do it, not the practicality of it, that is the key element. Employees can't send subbies.

But what's proposed is an amendment to Statute

[BlasterBates]

From what I understand it's not the case that Right Of Substitution is now not important, what they're doing is clamping down on contrived ROS, and when they say it won't affect contractors, they mean real contractors, but what about bums on seats contractors with their ROS standard clause they use simply to pass the IR35 reviews. I wonder if the border hasn't been moved slightly,

[GB9]

From what I understand it's not the case that Right Of Substitution is now not important, what they're doing is clamping down on contrived ROS, and when they say it won't affect contractors, they mean real contractors, but what about bums on seats contractors with their ROS standard clause they use simply to pass the IR35 reviews. I wonder if the border hasn't been moved slightly,

This is the point I have been arguing. If there is a standard clause that isnt reflected in the higher contract then that puts the agent at risk. As such, I can see agencies refusing to put the clause in the lower contract unless it is reflected in the higher contract. This would make being outside IR35 much harder.

[TheCyclingProgrammer]

But what's proposed is an amendment to Statute

Just to reiterate, the proposed legislation changes only change the agency regulations and do not change anything as far as IR35 and RoS go.