Undoubtedly, the question I’m asked most often nowadays,
both by Agents, and by Contractors, is some variant or other on ‘when will the
new Agency Regulations be coming into force?’.
Mrs
Egos would tell you that I dislike having to confess ignorance almost as much
as I dislike being wrong. However, in
this case, there is little useful I can say.
These proposed regulations first appeared in draft form in
about May 1999 out of the blue, against a background of an industry which had
found its way to work within the scope of the framework of the earlier
legislation (which had not changed substantially since 1976, apart from the
removal in 1994 of the requirement for agencies to be registered). The regulations were announced as being
necessary (in the view of the faceless ones) to correct abuses of which those
actually carrying on business in the industry were largely ignorant. They were not wanted by the industry, and
appeared to be a classic example of governmental interference by attempting to
‘fix’ something which had been working quite well in the first place.
After many representations were made, principally by
Agencies, the latest
draft of the proposed Employment Agency regulations was issued on
I check the
DTI website at http://www.dti.gov.uk/er/agency/newregs.htm
regularly, but as yet there has been no more precise indication as to when they
are likely to be brought into force.
Before the regulations can be
brought into effect, they will have to be 'laid before parliament' as a
statutory instrument, in order that they can be approved by parliament – a
process which generally takes some 6 weeks plus. At this point, the regulations will be
formally published by HMSO, and they will also appear on the website http://www.legislation.hmso.gov.uk/si/dsis2001.htm,
probably under the heading 'employment'.
Again, I check this regularly, but nothing has appeared as of yet.
I have heard suggestions indirectly
to the effect that a decision has been taken that the regulations are now
unlikely to be brought into effect in their present form, if at all. This might of course suggest that those who
first proposed them have accepted that they are unwanted by the industry – but
do not want to lose face by actually admitting that key fact! I am unable to say how reliable or accurate
this information is, beyond speculating that it is perhaps consistent with the
continued silence from official sources.
Were the regulations to be brought
into force, they would necessitate substantial changes in the way Agencies do
business, to the point where they would significantly interfere with their
current economic ‘model’.
They would make clear that the use
by Contractors of their own limited companies as a link in the contractual
chain does not of itself prevent the regulations applying – the key test as to
whether any such temporary placement is within the regulations would be whether
or not the Contractor is working ‘under the control’ of the engager – ie the
Client. Not a situation which the
average IR35-concerned Contractor would want in any case!
Given then the commercial pressures
that Agencies would be under from Contractors to maintain IR35-friendly terms
by reflecting the ‘non-control’ reality of many contracts in order to be able
to attract Contractors at the best rates, Agencies could then be in a position
where some of their business is within the scope of the new regulations, whilst
the rest is not – and the actual test would depend on the reality, which is (1)
outside the Agency’s control or knowledge, and (2) often only clear at a later
point. Despite this, the Agency would
have to take a decision at the outset as to whether or not they regarded a
particular engagement as within the scope of the regulations or not – and to
present that decision to both Contractor and Client. Clear as mud?
Undoubtedly! And I then would
have concerns about the risk that the presentation by an Agency of a contract
as being within the scope of ‘Employment Business’ might itself be seized on as
IR35-prejudicial by the Revenue.
It seems to me that, given the
current uncertainty as to whether the proposed regulations will be brought into
force (1) in their present form, or indeed (2) at all, it would clearly be
premature for agencies to consider revising contract terms to fit in with them,
other than by taking a decision in principle to do so once the final form of
the regulations (and indeed their reality) becomes clear. One can’t decide what one’s position is to be
in relation to regulations, let alone draft documents to cater for them, until
one has actually seen the final wording.
Meanwhile, the former regulations
continue in force. 'Handcuff' clauses
continue to be enforceable as before, subject only to the general law relating
to restraint of trade;
nothing has changed. And,
quite possibly, it won’t.
I'd really appreciate your feedback on this FAQ - so mail me and tell me what you think of it, if it's been useful to you, or let me know of any specific problem you have where I may be able to help.
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