Agency Contract
The issue
The issues here would appear to be whether there the contractual
arrangements fall within the Revenue definition of a 'standard agency contract'
- and if so, what effect that has, and whether it
·
helps towards a decision on whether that
relationship, had it been direct and without a company in between, would have
been an employment contract - a contract of service - or a contract for
services, or
·
would be inherently inconsistent with a
contract of employment.
The Contract
The contractual arrangements involve an agency. The Contractor's services
are hired in by the agency for the express purpose of being hired on to the
named client; and then so hired on by the agency, on terms which are outside
the knowledge of the Contractor. The contract is potentially within the
Revenue's definition of an agency contract.
Legal issues, and the Revenue Guidelines
Guidelines
The terms of contracts used by service
company workers who obtain engagements through agencies tend to be of a standard
form. Such contracts typically require the worker to work on the client’s
premises, use the client’s equipment, work standard hours, be paid at an hourly
rate and be subject to a high level of control. In such cases, the opinion of
the IR about the engagement is likely to be that it would be employment.
Where a worker is engaged on this type
of contract for a period of one month or more, and cannot demonstrate a recent
history of work including engagements which have the characteristics of
self-employment (see the third example below) then we will say that the
engagement would have been employment and therefore be covered by the new rules.
Where the contract is for less than a month, then, although the engagement may
still have been one of employment, the status position will be considered on a
case by case basis.
Elsewhere within the guidelines the Revenue also say:
The role of the IR is to provide advice
and guidance about the employment status resulting from a given set of
circumstances, not to impose any particular status. The terms and conditions of
any engagement are entirely a matter for the parties involved.
The Revenue state the following criteria, and indicate that if all are
satisfied then they will regard the contract as likely to fall
within IR35:
·
(The contract requires the Contractor to) work
on the client’s premises,
·
(The contract requires the Contractor to) use
the client’s equipment,
·
(The contract requires the Contractor to) work
standard hours,
·
(The contract provides for the Contractor to)
be paid at an hourly rate
·
(The contract requires the Contractor to) be
subject to a high level of control.
Where the above factors are all satisfied, they say they will
treat the contract as falling within IR35 if:
·
(The) worker is engaged on this type of
contract for a period of one month or more, and
·
(The worker) cannot demonstrate a recent
history of work including engagements which have the characteristics of
self-employment
They also say that 'Where the contract is for less than a month, then,
although the engagement may still have been one of employment, the status
position will be considered on a case by case basis.'
This declared policy, whilst undoubtedly convenient for the Revenue, is
clearly self-serving, and flies in the face of all existing case law and of the
principles which the Courts have laid down for deciding such issues. It not
only seeks to return to the idea of a 'checklist' (which the Courts have made
quite clear is NOT the correct approach), but by doing so it also specifies the
items to be included in that checklist, and (by implication) which items are not
to be included - and thus again omitting other factors which the Courts have
accepted as relevant - all of which may be significant, but in particular
omitting to consider such factors as may result in inherent inconsistency with
employment status, and many of the personal factors. It also assumes that the
selected factors only point in one direction, which again runs contrary to
logic, experience, and established case law - which makes clear that the weight
to be placed on factors and direction in which they point may both vary,
according to the circumstances.
These comments have been criticized scathingly by the Judge in the PCG
Judicial Review case as 'inflexible', and their consequences described as
'inappropriate'; the Judge made clear that, standard agency contract or not, it
is still necessary to consider all relevant factors.
It is, in my judgment, inappropriate that
there should be in the February Guidance, which contains the helpful assessment
of the positions of Henry, Gordon and Charlotte, the apparently inflexible
stance that it is only where a contract in the agency's standard terms is for
less than a month that the
"status position
will be considered on a case by case basis".
Although it is right to say that the same
Guidance makes it clear that in respect of such contracts for more than one
month the Revenue will not automatically assume that it is to be treated as
employment where the service contractor can
"demonstrate a
recent history of working including engagements which have the characteristics
of self-employment',
there may still be other factors to consider.
Clearly some uncertainty could be resolved by the drafting, agreement and
approval of a series of acceptable new standard forms.
The Judge's comments suggest that his view is that the IR35 status of each
engagement should be considered on its own merits, and that the Revenue's
statement of their position in this guidance on agency standard contracts is
unsupportable. This would certainly be consistent with legal authority.
Conclusion
what would the position be likely to be in relation to this factor for a
hypothetical employee? Logic and experience suggests that a hypothetical
employee would probably expect to enter an agency contract containing such
standard terms as laid down by the Revenue.
what would the position be likely to be in relation to this factor for a
hypothetical obviously self-employed person or consultancy (eg Andersens, or by
PWC, or EDI?). Logic and experience suggests that a hypothetical obviously
self-employed person or consultancy would
·
probably not expect to enter an agency contract
containing such standard terms as laid down by the Revenue, but instead would
seek to ensure that the contract terms more accurately reflected the reality of
the actual relationship and the Individual's independent status
·
probably have a 'recent history of work
including engagements which have the characteristics of self-employment'.
do the facts here actually provide a helpful pointer towards either view?
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