Resources For Candidates
As part of the ongoing support Osirian provides for its candidates, below we have provided information and further resources about the following aspects of employment.
Osirian's legal adviser, Rebecca Seeley Harris, is a leading specialist on the Regulations and IR35. She has prepared the following contractor guidance:
IR35 is the common name for a piece of legislation which came into force in April 2000. This legislation deals with individuals who work through a personal services company who may otherwise be deemed employees of the end client. Its purpose is to force these individuals to pay income tax (PAYE) and national insurance (NI) at rates comparable to 'normal' employees. Under the legislation, the onus is on the director of the personal service company to decide whether a contract 'passes' or 'fails' IR35. For any contract that 'fails', tax and NI is calculated according to the IR35 rules.
The IR35 status of an individual is determined on an assignment by assignment basis by a combination of the contractual conditions in place with the agency and/or end client and the working practices operating on the ground. Because it's a grey area, it's important that both the contractual and practical arrangements are appropriate if you wish to 'pass' IR35. The way an agency implements the Conduct Regulations may have an impact on working practices and thus on an individual's IR35 status. Osirian has established procedures to avoid this.
Employment Agency Regulations (EAA)
The Conduct of Employment Agencies and Employment Businesses Regulations (2003) ("The Regulations"), governed by the Employment Agencies Act 1973, became law in April 2004. They regulate the way employment businesses (agencies) deal with both permanent and contingent recruitment, aiming to ensure a high level of professional conduct in the recruitment industry.
Many trade and contractor organisations successfully lobbied the government to allow limited company contractors the choice of opting out of the Regulations, because it is widely perceived that they are not appropriate for people working via a business-to-business relationship, whereas they're more appropriate for agency workers who have an employer-employee relationship.
Agency AWR Position (explanation for hirer)
The Agency Workers Regulations 2010 (AWR) came into force on 1 October 2011. The AWR does not exclude limited company contractors, but there is an exemption for those who provide their services where the client is "... a customer of a profession or business undertaking carried on by the individual ...", or as the BIS Guidance states the AWR excludes those who are in business on their own account.
The current industry thinking on the AWR is that if a contractor is outside of IR35, they will also be out of scope for the AWR . In assessing whether the contractor is in business on their own account the following evidence will be necessary:
- the contract between the contractor and the recruitment agency (first contract);
- the contract between the recruitment agency and the client (second contract);
- how the contractor works in practice both in running their own business and how they provide their services to the client;
- whether the first contract mirrors the terms of the second contract (in so far as they relate to the contractor), this may include, for example, whether the contractor can substitute themselves with another contractor and whether the client is obliged to continue to provide work for the contractor outside of the current contract;
- the way in which the parties work in practice and whether this is congruent with the terms in the first and second contract.
It is essential, therefore, in establishing whether the contractor is out of scope of the AWR to consider the points above, especially, how the contractor works in practice. Both the recruitment agency and the client have statutory obligations under the Regulations, so it is important to work together to establish whether the contractor is out of scope.
As a recruitment agency we work with limited company contractors and assess whether those contractors are in or out of scope of the Regulations, by taking the following action:
- Provide a contract to the contractor which is a business to business contract (a template copy can be viewed upon request);
- Require the contractor to sign a statement that they have reviewed their employment status and confirm that they are in business on their own account;
- Request the hirer to provide details of the basic working and employment conditions of a comparable employee; and
- Request the hirer to provide evidence of the working practices of the contractor when providing services for the hirer. This is in order to establish whether there is any supervision or direction of the contractor by the hirer.
IR35 and AWR are not connected and being found to be inside IR35 does not automatically mean that the contractor is an agency worker and vice versa.
The recruitment agency cannot guarantee and give no indemnity that these measures will ensure that the contractor is out of scope of the Regulations.
This link offers more information on AWR from Inland Revenue approved specialists: Professional Passport / AWR
Limited Company Procedures
Disclaimer: Osirian cannot advise a contractor on whether they should use an umbrella company or a personal service company or another type of financial arrangement. Neither can Osirian recommend a particular payroll service provider. The companies listed below are reputable solutions to the best of our knowledge, but Osirian cannot accept liability or responsibility for the choice of service provider that a contractor makes.
Professional advice should be taken before agreeing to use a particular service.
Although, technically, it's possible to freelance as a self-employed sole trader or partner, the vast majority of professional contractors ply their trade via limited company arrangements because of these prime advantages:
- You can work via an agency rather than always finding work yourself
- You can enjoy tax efficient management of income, including dividend payments as a company director
- A wider range of expenses can be deemed tax deductible
- The company can benefit from VAT registration
- You are protected against the company's debts in the event of insolvency
Companies House allows approved agents (e.g. most accountants) to register a company electronically within hours. You can then apply for a company bank account and, once this is open, it can receive payment for the work you've done. Most limited company contractors engage an accountant to deal company returns, tax, VAT and PAYE issues.
A popular alternative to setting up your own company is to use the services of a company that provides umbrella arrangements. For a fee, they will manage all aspects of your remuneration and accounts. An umbrella company can offer some of the benefits of a limited company without the administration or statutory responsibilities. Some specialist advisers may also offer other benefits that would normally only be available to permanent employees.
Whichever route you choose, make sure you are receiving good tax advice and have peace of mind on such things as insurance cover and IR35 compliance.
A helpful website with Inland Revenue approved specialists is Professional Passport