The introduction of the Agency Worker Regulations on 1^st October this year has had an apocalyptic effect on the recruitment industry which has already had more than its fair share of legislation to deal with over the years. This latest offering from the EU was gold-plated, thanks to Union intervention, and is backed by a comprehensive guidance manual published by BIS. It would seem, however, that, despite BIS’ best efforts, misinformation is spreading fast and furiously and is becoming ever more distorted as some recruiters make desperate efforts to avoid the legislation that is costing them a fortune to implement and swiftly reducing demand for temporary staff. The problem with many of the ‘solutions’ that are being discussed on the internet is that they may well result in huge fines for recruiters and even business wrecking penalties applied by HMRC using the debt transfer legislation.

Lisa Keeble, MD at umbrella company ContractorUmbrella Ltd, works closely with recruitment agencies and is concerned that many are being misled by bad advice being offered on the internet by those without the technical legal knowledge required to interpret complicated new legislation. Mrs Keeble engaged the services of leading specialist recruitment sector lawyers, Blake Lapthorn, to help tackle the thorny issues arising from the AWR and both organisations feel that it is essential to raise awareness over the potential pitfalls for recruitment agencies. The intention of this article is to dispel the common myth that all limited company contractors will be outside the scope of the Agency Worker Regulations.

Oliver Weiss, a senior solicitor at Blake Lapthorn, goes on to explain:

It may be a while yet before the industry sees the first AWR cases being litigated in the Tribunals but, six weeks since their introduction, both Lisa and I have had the chance to reflect on the initial impact of the AWR on the temporary recruitment industry. We would like to set the record straight on what appears to be a commonly held belief, that one can avoid the impact of the AWR solely by drafting amendments to contracts, or by having the parties agree to designate their relations as being outside the scope of the AWR, none of which is necessarily correct.

In response to the AWR some recruitment agencies have insisted that they will only deal with and supply workers who operate through limited companies. This appears to reflect the fact that it has become something of an AWR truism that if you work through a limited company you will be “self-employed” and therefore automatically fall beyond the reach of the AWR.

It can certainly be said that those individuals who are genuinely self-employed will not satisfy the definition of an agency worker, either because such individuals are by definition not going to be working under the supervision and direction of the end user client or because either the agency or the client can be said to be a customer or client of a profession or business undertaking carried on by the individual. However, one should not underestimate how difficult it can be to show that the above conditions apply and in reality many individuals who work through their own limited companies are likely not to be self-employed. Determination of employment status is nuanced and complex, involving questions of mixed fact and law, and will depend on the circumstances of each case. It is therefore overly simplistic to adopt the mantra, as some agencies and clients appear to be doing, that a person who is working through a limited company is self-employed and therefore need not worry about the AWR. The law is very clear that it is not of itself sufficient that the parties have labelled the relationship to be one of self-employment if upon closer scrutiny what happens in practice does not reflect this and the individual cannot objectively be said to be genuinely in business on their own account.

Agencies that are requiring contractors to incorporate on the basis that this will take them outside the scope of the AWR are in most cases doing no more than re-labelling an existing relationship. That is to say if these contractors were not genuinely self-employed before they incorporated then in many cases they are unlikely to be self-employed after incorporation.

A lot of end user clients are seeking declarations from agencies confirming that the AWR do not apply as well as blanket indemnities in respect of AWR claims and in some cases these are being given simply on the basis of the mistaken belief that the contractors that are being supplied are outside scope because they are operating through their own limited companies. Not only does such an approach underestimate the complexity of employment status issues but it may also result in the agencies and end user clients being caught by the draconian MSC legislation and debt transfer provisions.

For umbrella services visit ContractorUmbrella’s website www.contractorumbrella.com and for legal serviced from Blake Lapthorn see http://www.bllaw.co.uk/

‘IR35 Friendly’ Contracts – Not So Friendly!!

On 27^th July 2011 the judgement was handed down from the Supreme Court in the case of Autoclenz Ltd v. Belcher and Others and it has confirmed that a contract that is written to be inside IR35 but is not a reflection of the work the contractor will actually be doing is not worth the paper it’s written on.

The written contract used by Autoclenz stated quite clearly that:

• the contractors were considered self-employed and were responsible for their own tax and NI contributions
• The intention of both parties was that the contractors were not, and would not become, employees of the company
• The contractors could provide a substitute if they were unable to work personally – “….you are entitled to engage one or more individuals”.
• The contractors would have to provide all or some of their own equipment
• There was no obligation on either side – “you will not be obliged to provide your services on any particular occasion not, in entering into any such agreement, does Autoclenz undertake any obligation to engage your services on any particular occasion”

The contract, taken in isolation, would most likely be considered, by any reviewer, to be outside IR35 but the Supreme Court Judge decided, based on working practises, that the contract was inside IR35 and the contractors would be considered as employees of Autoclenz.

The good news is that, as an employee of ContractorUmbrella, you do not need to consider IR35 or expose yourself to any future risks regarding your employment status. Working through an umbrella company you are outside the scope of IR35 as you are employed by your umbrella company and paid through PAYE. Visit our website www.contractorumbrella.com.

If you would like to discuss any aspects of using an Umbrella Company you can contact one of our expert advisors on 01206 713 680 or email us at info@contractorumbrella.com.

It is shocking that a large number of contractors have lost thousands of pounds after the demise of offshore umbrella company Tract Management. Those contractors affected are attempting to band together to bring justice against the owners of Tract Management who just seemed to disappear from the company’s offices overnight. 

With the introduction of BN66 , Disguised Remuneration Legislation (Finance Bill 2011) and the EBT legislation, it proves that HMR&C are serious about closing down schemes that make ‘too good to be true’ claims. The reality of the situation is, despite their promises, companies offering offshore and loan based schemes aren’t safe and you run the risk of the same thing happening with your money as happened to the unfortunate clients of Tract Management. If you live and work in the UK, you are liable for UK taxes and no clever solutions can avoid this fact.

Don’t gamble with your money – ContractorUmbrella Ltd is the market leading UK based Umbrella company and is fully compliant with all HMR&C legislation, including the AWR. Register today and it will be one of the best things you’ve ever done!

For more information visit www.contractorubrella.com. You contact one of our expert advisors on 01206 713 680 or email us at info@contractorumbrella.com.

In October 2011 a new piece of legislation will be put into place in the UK which was designed to protect the interests of individuals who work through Employment Agencies and give them rights equal to those of permanent employees in comparable positions. The legislation is referred to as the Agency Worker Regulations and includes Umbrella Company employees.

Under the terms of the legislation, anyone working through a Temporary Work Agency (TWA) will be covered by it unless they are working in business on their own account. Therefore, ‘Temps’, individuals working through Umbrella Companies and single person Limited Company contractors whose contract falls inside IR35 will all be protected by the regulations.

The Regulations give Agency Workers entitlements and protections, some of which come into force from the first day of the contract and some after a 12 week qualifying period.

The Day 1 Rights as they are referred to mean that from the very beginning of the contract an individual must have access to facilities at the Hirer’s (or end Client) site and also to vacancies in the same way as a permanent employee. This does not mean that a contractor would be entitled to a car parking space if there were none available but that they would be allocated a space if there were one available; the treatment must be equal to permanent employees not better. Listed below are examples of facilities provided by a Hirer (or end Client) that must be made equally available to both permanent and temporary employees:

• A canteen
• Creche
• Toilet and shower facilities
• Staff Common Room
• Mother and baby room
• Prayer room

After 12 weeks working on the same contract individuals who fall under the Regulations will have new equal treatment entitlements relating to pay and other basic working conditions. The working conditions referred to are as follows:

• Duration of working time
• Night work
• Rest periods
• Rest breaks
• Annual Leave
• Time off for ante natal appointments.

Visit our website www.contractorumbrella.com. Alternatively you can contact one of our expert advisors on 01206 713680 or email us at info@contractorumbrella.com.

The regulations were introduced to give low-skilled agency workers protection from being exploited by work seeker companies (employment agencies). Contractors were however also being included within this legislation, although an option to ‘opt-out’ of the legislation was agreed, which caused confusion within the industry and amongst individuals so the government proposed to update and further clarify the regulations.

A consultation period was set-up so that anyone affected could, if they wished, submit their comments and these would be taken into consideration before making any changes.

One of the issues to be discussed was whether or not workers employed through umbrella companies were at risk from exploitation. The BIS has now published their response document following the end of the 3 month consultation period and the analysis of the comments of almost 350 respondents. The opinion formed after this extensive research is that, for the time-being, the regulations will remain as they are and the opt-out in place. The reason given is that the consultation has not provided convincing evidence of vulnerable workers suffering detriment whilst working through an umbrella company. However, this particular issue is not necessarily laid to rest as the BERR are continuing to ‘gather evidence’.

For more details visit http://www.berr.gov.uk/consultations/page50428.html.

If you would like to discuss the regulations you can contact a member of our team on 01206 713 680 or email us at info@contractorumbrella.com. Alternatively visit our website www.contratorumbrella.com.

It is human nature that people will look for ways to save money and advertisements promising 85% or even 90% take home pay from your earnings will always be tempting. So, is it possible? Yes, definitely. Is it risk free? Definitely not? In fact, you can quite safely say that the risks attached to ‘tax saving’ schemes are astronomically high.

ContractorUK, the country’s biggest contractor forum has had threads running, for over a year, about offshore schemes and the legislation surrounding them. The posts have had over 400,000 views. Why? Because over 2000 contractors who have used these schemes are now subject to tax investigation by HMR&C and their average tax bill is reported to be  £140,000. The contractors involved have banded together and are fighting their case but the legal process will take months, if not years, and in the mean time they are left with umimaginable stress and worry. The bills that they have received are far higher than their original tax savings because HMR&C have applied legislation retrospectively (for more info see http://www.contractorumbrella.com/bn66.html) and also applied interest and penalties.

The particular piece of legislation that is affecting these contractors dealt specifically with tax avoidance through use of double taxation agreements so perhaps there is less risk attached to offshore loan schemes? No, not really. The problem is that the tax rules of other countries have absolutely no relevence for you unless you are tax resident there. If you live in the UK and earn money in the UK that income is subject to UK tax; there are no ways around that premis that will not attract very negative attention from HMR&C.

You also need to consider the mechanism behind loan schemes. Basically, the loan company will deduct their fee (usually extremely high) then pay you a small salary; the rest of your income will be paid in the form of a loan. The problem with this is that when the loan is written off  it becomes taxable in full and, if it is not written off, the full balance is payable to the loan company and can be recalled at any time. There is also the risk of being hit twice for the debt. The ‘loan’ is a benefit in kind (BIK) and if it’s not declared on your tax return as income, you also potentially face a huge tax bill and fine, on top of repaying back the original loan.

There are new tax avoidance schemes coming to the market every day and they will all try to convince you that you will be safe from investigation. Quotes such as ‘HMR&C compliant’ and ‘approved by leading council’ are common but do they mean that HMR&C approve of the scheme and will not be coming after you for large sums of money sometime in the future? No. This Government is clamping down, extremely heavily, on anything which encourages people to avoid paying their ‘fair share’ of tax. The UK Treasury Minister Stephen Timms has stated:

“…there are a minority who continue to seek ways to avoid paying their share [of tax]. This is unacceptable. It is unfair on the majority of taxpayers, undermines fiscal sustainability, and reduces funding for public services. This government will not tolerate tax avoidance or tax evasion in any form, and will act promptly to tackle both of these”

So, if you are considering a ‘tax saving’ scheme my advice would be to ask yourself if you are the sort of person who would view a game of Russian Roulette as a bit of a laugh. If you are – go ahead and good luck; if you’re not then I would think again.

You can email a member of our team at info@contractorumbrella or alternatively call us on 01206 713 680.

Anyone who has seen the film Minority Report will understand the concept of punishment for a crime before it has happened based on the visions of the thought police. A thought provoking fantasy, one would think, without any basis in reality…….until now.

It is common knowledge that HMR&C are currently exploring the many uses for retrospective tax legislation; a number of MPs have loudly damned the practise following large tax bills received as a result of the expenses scandal.

Hundreds of UK contractors have also been on the receiving end of restrospectively applied tax demands as a result of BN66, legislation introduced to prevent tax avoidance through the use of offshore trust schemes. According to the biggest UK contractor forum many are facing bankruptcy, the loss of their homes and the breakdown of their family life as HMR&C pursue them for tax liabilities calculated for up to seven years before introduction of BN66.

One would think that things could not get any worse but a report in the Telegraph on 19th October proved that BN66 is just the tip of the restrospective iceberg. New guidance given by HMR&C to tax inspectors seeks to give a clearer definition of tax avoidance. The result is an exponential increase in power for the Revenue accompanied by a new threat to those tax payers not in possesion of a crystal ball. The key passage states:

“One definition (of avoidance) is ‘a situation where less tax is paid than Parliament intended, or more tax would have been paid, if Parliament turned its mind to the specific issue in question”

So not only does the UK tax payer have to consider current legislation it also has to consider restrospective legislation – it appears in the future we could also have to face tax penalities as a result of legislation that doesn’t actually exist. A scary thought!

For more information on the BN66 legislation please visit http://www.contractorumbrella.com/bn66.html. You can contact a member of ContractorUmbrella on 01206 713 680 or email us at info@contractorumbrella.com.