Contractor/Agency rights to choosing an Umbrella Company

[LisaContractorUmbrella]

The debt transfer section of the MSC legislation can only be applied if the agency recommends or actively encourages workseekers to use a managed service company. Agencies are under no threat from the legislation provided that they ensure that any umbrella company that features on their PSL only makes payment via PAYE.

[Jet Setter]

However, in Oct 2007 HMRC issued a statement clarifying the situation:

"Provided that the Employment Business has not, since 6 April 2007, been directly or indirectly involved in the workseeker obtaining the company, then the Employment Business will not be liable for any PAYE or National Insurance debt under the transfer of debt provision should it subsequently transpire that the workseeker’s company is a Managed Service Company."

HMRC are effectively saying that the agency should not have any involvement in the worker's choice of intermediary. Therefore by restricting your choice of umbrella company, your agency has opened itself up to the MSC transfer of debt provisions. If you educate your agency about this, you may find their stance changes. The following link may be of use:

http://www.hmrc.gov.uk/employment-st..._companies.htm

It's amazing how few agencies seem to know that by operating a PSL they can lose the exemption they have under the MSC legislation.

As previously stated though, most agencies have no problem with people using their own companies.

[sal626]

Incidentally I have now spoken to the agency and they have indeed refused to go with any umbrella apart from their 4 preferred umbrellas.

I think I've done a contract through this agency as well. What they don't tell you (and I found out later), that its one of those 4 companies OR your own limited company. Worth checking this with them if you prefer ltd to umbrella.

[PhilBreeze]

Most agencies have a preferred supplier arrangement because they are not prepared to undergo due diligence on every new umbrella company that they come across. Agencies are in the business of putting bums on seats and the more complicated the process, the higher their costs. A major UK agency previously saved £80k per annum implementing a PSL. PSLs can also represent an additional revenue stream for the agency if they are receiving a commission from the brollies for sending business their way.

The MSC legislation of 2007 contained provisions that allow HMRC to transfer the income tax & NICs liabilities of contractors who haven't paid enough tax to their scheme promoters and agencies, under certain circumstances. At this point the agencies tulip their pants at the prospect of potentially becoming liable for their contractors' tax bills overnight (!). As a consequence, most agencies picked 2 or 3 brollies that they were confident were compliant and invoked a strict PSL - and who could blame them.

However, in Oct 2007 HMRC issued a statement clarifying the situation:

"Provided that the Employment Business has not, since 6 April 2007, been directly or indirectly involved in the workseeker obtaining the company, then the Employment Business will not be liable for any PAYE or National Insurance debt under the transfer of debt provision should it subsequently transpire that the workseeker’s company is a Managed Service Company."

HMRC are effectively saying that the agency should not have any involvement in the worker's choice of intermediary. Therefore by restricting your choice of umbrella company, your agency has opened itself up to the MSC transfer of debt provisions. If you educate your agency about this, you may find their stance changes. The following link may be of use:

http://www.hmrc.gov.uk/employment-st..._companies.htm

[The Wikir Man]

that's no excuse for an agency to shaft people.

It's the responsibility of any business to get the best deal for that business. If that involves choosing supplies that may charge their own suppliers more, then so be it.

[Wanderer]

Well there is always an administration period to get these contracts up and running, and when you dont want to risk loosing the position altogether by 'refusing to start until the contract is drawn up' what can a new contractor like myself do.

Bend over and get shafted.

You have EVERY RIGHT to have a written contract before you start and I can GUARANTEE you that if the client tells the agent to get your paperwork sorted out so you can start tomorrow, the agent will be off like a dog with a firework up it's bum to get it sorted. Contracts will be emailed, signed, scanned and returned quick smart. Don't believe this BS about some "administration period". Many clients won't even allow you on site without a current contract.

And what are you going to do when the contract comes through in 2 week's time and it's at 20% less than the rate you agreed? Woops, shafted again.

Incidentally I have now spoken to the agency and they have indeed refused to go with any umbrella apart from their 4 preferred umbrellas.

And now that you've started working for the client (with no contract), you have pretty much zero opportunity to negotiate. You have to do exactly what they tell you to do and accept whatever contract terms they throw at you.

I feel rather hard done by as the companies they prefer are some of the most expensive on the market.

No doubt they are getting a kick back too.

Oh well, we live and learn don't we. My advice is to take it on the chin, put it down to experience and get on with the contract. We were all noobies once, but that's no excuse for an agency to shaft people.

[The Wikir Man]

Well there is always an administration period to get these contracts up and running, and when you dont want to risk loosing the position altogether by 'refusing to start until the contract is drawn up' what can a new contractor like myself do.

You should never start work without a contract - would you start a permanent job without knowing exactly what you are signing? Once you start work, you lose the only card you can play - you are tied to them, you have accepted the contract, you have no bargaining chip any more.

You are now in a position where you are paying a company to provide a service that they can't, and you need to untangle that.

Incidentally I have now spoken to the agency and they have indeed refused to go with any umbrella apart from their 4 preferred umbrellas.

That's they prerogative. They have the right to choose who they do business with.

I feel rather hard done by as the companies they prefer are some of the most expensive on the market.

Welcome to contracting. It sucks sometimes. If you feel hard done by because of this, then you might want to think about your career choice.

but according to the National Pay and work rights helpline, there is no ledgislation that stops and agency from limiting the contractors choice, so looks like the law is on their side

Of course the law is on their side. What you seem to be after is legislation that allows one company to force another to work with them. That doesn't really make sense, though - there are plenty of companies I don't want to work with, and nothing is going to force me to do that.

Stop thinking like an employee, start thinking like a contractor. Failing that, go back to permiedom.

[howardheffer]

Uhhh, are you working without a signed contract? Don't do that. Seriously, it will just cause you a load of grief and you have very little bargining power in this situation. ALWAYS agree a contract BEFORE you start working on the client site.

Well there is always an administration period to get these contracts up and running, and when you dont want to risk loosing the position altogether by 'refusing to start until the contract is drawn up' what can a new contractor like myself do.

Incidentally I have now spoken to the agency and they have indeed refused to go with any umbrella apart from their 4 preferred umbrellas.

I feel rather hard done by as the companies they prefer are some of the most expensive on the market. but according to the National Pay and work rights helpline, there is no ledgislation that stops and agency from limiting the contractors choice, so looks like the law is on their side

[Wanderer]

Welcome!

Surely if the umbrella company in question is fully compliant with HMRC then the agency should not be able to dictate!?

I've seen some that say "fully compliant" but it's doing some Isle of Man scheme or whatever. I don't blame agencies for refusing to deal with these...

I started a new contract 5 days ago (The contract hasn't been finalised yet by the agency)

Uhhh, are you working without a signed contract? Don't do that. Seriously, it will just cause you a load of grief and you have very little bargining power in this situation. ALWAYS agree a contract BEFORE you start working on the client site.

[TykeMerc]

Your post is concise and clear, unfortunately the answer is clear too.

As Wikir Man said the agency is within its rights to refuse to do business with any company, while they almost never refuse to deal with a MyCo Ltd it's not that rare for an agency to refuse to deal with some Umbrellas. It's especially common for them to refuse to do business with umbrellas that operate esoteric tax planning schemes.

[The Wikir Man]

Fact 1: You have the right to choose who you want to work through.

Fact 2: A business has the right to choose who they do business with.

If the agency does not want to do business with the company that you work for, then you either need to (a) move companies; (b) move agencies; (c) convince them to work together.

[howardheffer]

Hi,

This is my first post on this forum as I did not know a better place to find advice!

My question is - what rights do the agency have to tell contractors which umbrella they can and cannot use - and what rights do contractors have to choose??? Surely if the umbrella company in question is fully compliant with HMRC then the agency should not be able to dictate!?

Thanks for the advice