Is anyone using a contrived agency contract?

[FarmerPalmer]

BBC News - Autumn Statement: Bid to recoup £9bn in unpaid tax

[malvolio]

BBC News - Autumn Statement: Bid to recoup £9bn in unpaid tax

Thousands. You'd be amazed how many hotel cleaners are company directors...

[CheeseSlice]

Thousands. You'd be amazed how many hotel cleaners are company directors...

When I read this, I'm not so sure its about those who are directors of their own companies. Aren't these just workers who are made to look like they're self-employed?

Working via an agency

The chancellor has announced changes to prevent "employment intermediaries being used to avoid employment taxes and obligations by disguising employment as self-employment".

Although this sounds like an attack on personal service companies, the BBC understands that this is not the government's intention - the changes are instead to be focused on agencies.

If you work through an agency you are treated as self-employed if you meet certain specific tests. One of these tests is the right to send someone else to do the job instead of you - known as the right of substitution.

If there is a right of substitution, the company you work for does not have to pay employer National Insurance, saving 13.8% on all wages over a low threshold.

Some agencies - employment intermediaries - have been using contracts which include a clause giving the individual a right of substitution, even though there is, in reality, no such right.

The new rules are expected to target the use of such contrived contracts, and the changes are expected to net around £500m a year.

[captainham]

Yeah but how many of us can genuinely, truly send a substitute in, despite what the writing on the contract says?!

I would say the majority can't...

[GB9]

Interesting

I've just had a sub on site for a couple of months and the agency said it was the first time anyone they had placed had actually done that.

Anyway.....it's all very well having the right to a substitute in the contract between your Ltd. Co. and the agency, but if the upper contract doesn't reflect that right, then that will drop the agency in it as the contract will be deemed to be contrived under this new rule.

Does that then mean that agencies will refuse to put in a contract re: right of substitution unless it is reflected in the end client's contract? And hence (further) bring more and more Ltd. Co. contracts within IR35?

[Jubber]

Yeah but how many of us can genuinely, truly send a substitute in, despite what the writing on the contract says?!

I would say the majority can't...

I've often thought this with my contracts. I would say it depends on who the client is.

I'm currently working for a huge financial client in London - if I'm honest, I think I'd be canned at the mere suggestion of substitution. But other contracts I've had with smaller non financial clients I think it would have been fine.

One part of what the new legislation should include (IMO) is something like 'chain law' - which would make the end client responsible for any unpaid NI or tax for workers however they are brought in. That would scare the client into unambiguous watertight contracts with all workers and intermediaries.

[LisaContractorUmbrella]

I don't think this has anything to do with PSC's at all - HMRC have made changes to the Social Security Regulations which should come into force in April 2014 - the Draft Statutory Instrument seems to refer to sole traders and it looks as though rules similar to IR35 will be used to bring them into employment rather than self-employment. Although nothing has been clarified (as usual ) it seems that the agencies engaging the workers will end up being responsible for employer's NIC's and deducting PAYE taxes rather than the workers being responsible for their taxes.

Doesn't make for easy reading but detail can be found here https://www.gov.uk/government/upload...tion_Draft.pdf

[GB9]

I don't think this has anything to do PSCs[/URL]

On the face of it I agree. However, as I said above, if an agency's contract with client says no sub, but the one between agency and PSC does, and it has been put there for IR35 compliance, that could be seen to be contrived. Hence the agency becomes responsible for NI etc. I can't see agencies getting themselves into that position.

[LisaContractorUmbrella]

On the face of it I agree. However, as I said above, if an agency's contract with client says no sub, but the one between agency and PSC does, and it has been put there for IR35 compliance, that could be seen to be contrived. Hence the agency becomes responsible for NI etc. I can't see agencies getting themselves into that position.

There was a lot of speculation when the announcement was made but HMRC have since clarified ""The measures are targeting mass-marketed schemes, where workers can be moved en masse into self-employment, even though they should be employed. Often the workers are low-paid and unaware that they are being engaged on a self-employed basis until they try to claim employment rights. The measure is designed to stop this from happening.”

[GB9]

There was a lot of speculation when the announcement was made but HMRC have since clarified ""The measures are targeting mass-marketed schemes, where workers can be moved en masse into self-employment, even though they should be employed. Often the workers are low-paid and unaware that they are being engaged on a self-employed basis until they try to claim employment rights. The measure is designed to stop this from happening.”

It doesn't matter who they claim it is targetting. Once on the book it applies to everyone.