Introducing the Consultancy Project Agreement – a solution to the off-payroll legislation for consultancies
The new Consultancy Project Agreement package provides an innovative solution to the off-payroll legislation for consultancies engaging limited company contractors to deliver projects for the benefit of their clients.
The 'statement of work' model has been touted as a possible solution; however, this does not work unless (a) the contract terms are drafted by an expert in IR35 law and (b) the contracts for the limited company contractor and client contain mirroring provisions. For example, substitution can only work if the provision is enforceable throughout the contractual matrix.
We are aware of many statement of work type contracts which describe the services as a role and create control over the limited company contractor. Such contracts are utterly useless.
The Consultancy Project Agreement's author, Martyn Valentine LLB (Hons), has over 15 years of unblemished experience in advising thousands of consultancies, contractors and recruiters on IR35 matters.
The Consultancy Project Agreement is not an adapted recruitment contract – it's commercially balanced and eliminates risk in respect of both IR35 and the new off-payroll legislation.
How it works:
The Consultancy Project Agreement package consists of four parts –
-An agreement between the individual limited company contractor and consultancy providing maximum protection for all IR35 issues;
-An agreement between the consultancy and client containing mirroring provisions and commercial protection for the consultancy;
-An Assignment Schedule for the client setting out details of the overall project;
-An Assignment Schedule for the limited company contractor containing a definition of the services to be provided as part of the overall project.
The background law:
Chapter 10 Income Tax (Earnings and Pensions) Act 2003 defines the client as the party which receives the worker's services. This enables a consultancy to be defined as the 'client' irrespective of the fact that the consultancy has been engaged to deliver a project to its client.
While the draft legislation extends the scope of Chapter 10 to medium and large clients, an exemption has been created for clients which fall within the definition of a small company.
The qualifying conditions are met by a company in a year in which it satisfies two or more of the following requirements:
-1. Turnover of not more than £10.2 million;
-2. Balance sheet total of not more than 5.1 million;
-3. Less than 50 employees (not including contractors).
As a result, a consultancy meeting the above qualifying conditions will be exempt from the off-payroll legislation. Responsibility for assessing whether the IR35 legislation applies to the engagement remains with the limited company contractor, therefore, saving administrative costs and risk. As you are treated as the client meeting the small company exemption your client does not need to incur the risk of employment tribunal cases, compliance with the Agency Worker Regulations 2010 or litigation arising from the use of unregulated umbrella companies.
Contact us now on 07788 773871, 01323 479709 or email@example.com for information on pricing. The Consultancy Project Agreement can be adapted for your needs and prepared at short notice.
Remember, dealing with umbrella companies and employees is fraught with risk:
-Umbrella companies often illegally deduct employer's National Insurance contributions
-Umbrella companies offer nothing that a cheap payroll company can't provide for a fraction of the cost
-Employees can claim for many rights in the employment tribunal
-The administrative burden of complying the Agency Worker Regulations 2010
-The Equality Act 2010 applies to employees and workers – the employment tribunal is not restricted in the damages it can award to a claimant
-Do you really need the expense of a human resources department?
We have noticed a disturbing trend among recruiters who are forcing contractors to use umbrella companies as a condition of providing working finding services.
All too often, recruiters are making the provision of work-finding services conditional on the use of an umbrella or choice of umbrella companies.
Other than allegations regarding the Bribery Act 2010, it is understood that clients engaging contractors have bought into the fallacy that umbrella companies insulate them from employment tribunal claims.
Why is this wrong?
This practice amounts to charging for work-finding services. This is a criminal offence and is a matter for the Crown Prosecution Service. The Employment Agencies Act 1973 prohibits any direct or indirect charge for work-finding services.
The Conduct of Employment Agencies and Employment Businesses Regulations 2003 prohibits this practice and creates a right to claim damages in the county court for all fees and consequential losses including underpaid holiday pay, unlawful deduction of employer's National Insurance contributions and the Apprenticeship Levy. There is no reason to be forced to pay an umbrella company £20 - £40 per timesheet.
There are also allegations that certain umbrella companies may have questions to answer about the Bribery Act 2010 given that being on a 'preferred supplier list' is a virtually guaranteed source of income.
What should work-seekers do?
Contact The Law Place on 07788 773871 or firstname.lastname@example.org. We are considering various options for contractors to share costs.
DO NOT OPT-OUT OF THE CONDUCT OF EMPLOYMENT AGENCIES AND EMPLOYMENT BUSINESSES REGULATIONS 2003 UNLESS YOU CAN OPERATE OUTSIDE IR35 AND HAVE RECEIVED INDEPENDENT LEGAL ADVICE.
Unless you want to pay an umbrella company £20 - £40 per timesheet when payroll must be provided without charge by the recruiter you should either decline the offer of an engagement made under such circumstances or insist on your rights.
A recruiter is not liable if it provides a work-seeker with the choice of processing the payroll internally or a choice of umbrella companies as required by s.44(2) Income Tax (Earnings and Pensions) Act 2003.
Contact us if you have been forced to use an umbrella company.