The "Conduct Reg's" are virtually unenforceable against your intermediary

[DirtyDog]

Secondly, the hirer should be insisting on an opt out for all individuals supplied by a PSC Work Seeker.

If we accept your argument, since the regulations are virtually unenforceable, there should be no need to opt out.

[Rory Dwyer]

Dear Dirty Dog,

The reason I say this, is because of the impact of the controlled associated companies legislation on the hirer.

In much the same way a contractor would have to support a contradiction in their argument, re the lesser level of control required re IR35 verses Predominant control of the EAA, the hirer would also have to prove predominant control of the work seeker and defacto the individual supplied by the work seeker, or vice versa.

This would in all likelihood not be able to be proven due to the obligations of the controlled associated companies legislation as it pertains to taxation and consolidated reporting, which is highly unlikely that a hirer would be performing.

Therefore, if you have either one of the two parties aside from the intermediary, arguing that the contractor is not predominantly controlled by the hirer or the hirer argues that they don't predominantly control the contractor, then the defence or prosecuting barrister, as the case may be, will have a field day.

Of course, the reason I say virtually, is because the contractor may be recording his tax affairs in compliance within IR35 and the hirer might be complying with the controlled associated companies legislation.

But then, what would be the point ?

The reason the opting out is still important, is that it makes the following positive declarations;

1) the contractor has not handed over predominant control to the hirer
2) the hirer has not taken over predominant control of the contractor
3) for any particular engagement (if the situation is reflected in reality) the employment business declares that it is their belief that they are an employment business but not providing the work seeker or individual under the predominant control of the hirer or otherwise as the case may be.
4) it removes any ambiguity for all parties as to which legislation is applicable.

Even if the above declarations are not made, it does not follow that the engagement, would by default, be covered by the "Conduct Regs" as the intermediary (employment business, consultancy etc. could still argue that predominant control had not passed and it would then be down to the work seeker and hirer to prove that it had.

As stated previously, unless the contractor and hirer are conducting their affairs in accordance with the ancillary legislation in relation to predominant control, it would present conflicting and contradictory evidence before the judge as to the motivations of the parties.

[Wanderer]

But if a contractor is operating outside of IR35 and does argue in front of a judge that they had in fact passed over predominant control, as previously explained, this would be a major contradiction in the evidence in front of the judge.

It's nice to see that agencies care so much about our IR35 status but I do get tired of being told that it's linked to the Agency Conduct regulations when it's not. Agents keep repeating that over and over in the hope that people will start to believe it but strangely you never hear the respected specialists like QDOS or B&C trotting out that line. It's only ever agencies with their axe to grind....

The fact is that IR35 is judged on three things: D&C, RoS and MOO. Even if we fail on the D&C test, a realistic RoS and no expectation of a MOO means a contractor is outside.

Additionally, the contractor who entered an engagement not being under the predominant control who then during the engagement ( assuming it was not contractually restricted) did then become under the pre dominant control of the hirer then in all fairness, they should stop operating outside of IR35 for tax purposes.

Yes, agencies just keep banging on about IR35. Well thanks very much for your opinion, but we have our own independent specialists to advise us and a contractor's IR35 status is between them and HMRC. Nothing to do with you.

In my view, if the contractor and intermediary believe the engagement to not be under the predominant control of the hirer at the contract construction and acceptance stage then due to the ambiguity of the law, the contractor and work seeker should opt out of the "Conduct Regs".

No, because as I said before, in this situation the agency wouldn't be acting as an employment business so the regulations don't apply so there is nothing to opt out of and no need to even mention it.

If I was a hirer of psc's, I would be telling the intermediary I would only accept those psc's who had opted out. An act that may lead to a criminal charge if it was stated by the intermediary.

Really? Clients have told me there are solid commercial reasons for a contractor to not opt out, specifically the limits on restraint of trade and temp to perm fees that can be charged to the client...

One of the other reasons for bringing this topic to people's attention, is that this legislation is going through red tape review at the moment and if any changes are to be made, now is the time to propose any changes via your respective professional bodies.

Unfortunately we only have the PCG and they are siding with you on this one....

[Rory Dwyer]

Dear Wanderer,

As I have said all along, I am not trying to convince you either way. I respect your right to believe whatever you wish to believe, even if I don't believe what you believe.

I am not saying that if a contractor opt's into the conduct Reg's they are therefore with inside IR35. It is actually irrelevant to this discussion.

What I am saying is that for a judge trying to ascertain whether an engagement is covered by the EAA he has to be sure that Predominant control has passed from one party to another.

The onus is on the hirer and the work seeker to prove that in front of any particular judge. If there is contradictory evidence in front of the judge, I.e. The contractor believes that insufficient direction and control existed for tax purposes but then has to try and convince a judge that for other purposes predominant control had passed. A far greater bar to jump and I don't believe anyone can deny that this is a contradiction.

But as I have said previously, a contractor would have to provide this information in a court of law, in front of a judge, cross examined by a barrister, at the risk of perjury, in concert with the hirer. I would say that that is about as safe an option as catching a falling knife with oiled hands.

In the case of BIS v CNL, other than the precedent determining the outcome, one of the other reasons that the BIS failed, is that the contractor could not bring himself to say he was under the control of the hirer. His only comment to support the control issue, was that "he didn't consider himself out of control". A response even the judge laughed at.

The hirer representative, stated that he did not tell his contractors how to do things as he did not have the technical know how to do so.

Additionally, the contractor and hirer both signed contracts stating that the contractor was not under the control. An admission that brought accusations from the defending barrister of the hirer representative trying to deceive the court.

If I may, I would like to try to address this issue of acting as an Employment Business. CNL considers it self an Employment Business supplying highly skilled resources not under the predominant control of the hirer.

Therefore if the judge is of the opinion that predominant control had not passed then CNL is not an Employment Business as defined by the EAA.

In much the same way a contractor would honestly believe that they are operating in a contract for service, but if it is challenged and a judge had to decide what was the relationship, the judge could decide that it was in fact a contract of service and not a contract for service. That wouldn't make the contractor a liar.

A consultancy could argue they are a consultancy but a judge would have to decide whether any of the engagements had passed predominant control and if so then the consultancy could pass the definition of an employment business. That wouldn't make the consultancy a liar.

[Rory Dwyer]

Dear Wanderer,

For the purposes of this thread, I am not going to elaborate on the IR35 question as it relates to the EAA as there is much case law detailing the master/servant relationship.

Additionally, the EAA is only concerned with the predominant test I.e. The test of control, and as I have said previously, all that an intermediary has to do in any action is to seek disclosure of the tax returns of the work seeker and/or the individual supplied by the work seeker to expose the contradiction.

As it happens, in the BIS v CNL case, the contractor was foolish enough to admit in a sworn statement that it was personal service and the hirer exposed the MOO.

It reminded me of the Walter Scott verse "oh what a web we weave when we first practise to deceive"

Re the opinions you refer to, the only ones that matter are those opinions backed by the recorded judgements of a judge in a court of law as backed by any appeal. As commentators have correctly identified in earlier posts, the higher the court, the higher the weight attached.

[Rory Dwyer]

Dear Wanderer,

In relation to the clients position, I am very confident that, any statements made by any hirers would have been made without them being aware of the obligations of ancillary legislation.

If they were aware of their obligations re tax and consolidated reporting, they would run a mile from an opt in.

I would also go as far to say that prior to the thread I have started, very few people were aware of Accenture v HMRC precedent and the implications even though it has been around since 2003.

I wonder how many cases might now get appealed on the basis of this or actions started for breach of contract ? statute of limitations leave right of action open for six years preceding today's date.

In summary, opt in or opt out, it matters not a jot to me, I have shared my knowledge and experiences with you all so that you can take a more balanced and informed decision on how you wish to present your engagement.

I have started this thread for the readers of this forums benefit, some people would pay good money for the information I have imparted. As I said to Cojak, one day you might even thank me.

All an intermediary needs to do is for the contract to state (which ours did anyhow) that the hirer does not have predominant control of the work seeker or the individual supplied by the work seeker and if the individual and/or work seeker is operating outside of IR35 and the hirer is not complying with controlled associated companies legislation then you have a seriously hard mountain to climb to convince a judge otherwise unless all parties contracts to the engagement do not reflect reality.

It is your choice, just don't believe that whether you have opted in give you a cast iron protection because it doesn't.

[malvolio]

...snip...
Unfortunately we only have the PCG and they are siding with you on this one....

Really? On what evidence? Or to put it another way, what do you think they should be doing now? More than happy to ask the question for you.

[Rory Dwyer]

For the readers of this thread,

I will just touch on the issue of direction and control verses predominant control insofar as it relates to IR35.

An individual could have a contract of service where little control is exercised by the hirer, like a brain surgeon or captain of a ship, where maritime law gives the captain the predominant control.

So I accept that there can be an absence of direction of control and the relationship still be one of a contract of service, but it does not follow that if there is predominant control, this would not be a very clear indicator of a master / servant relationship regardless of moo and ros.

The main pillar of the master/servant is the control issue, the moo and ros are lesser tests.

In most cases the ros is illusory, and that only means that a contractor is relying on one moo.

Well a judge could rightly say that in uk employment law that a hirer can remove an employee on probation within the first year without any notice, which to me drives a steak through the heart of that argument.

Also please understand that predominant control means the principle in party in control. That can only be one party either the contractor or the hirer.

To take the position that the predominant control issue has no relevance to IR35 is verging on the delusional.

[malvolio]

Also please understand that predominant control means the principle in party in control. That can only be one party either the contractor or the hirer.

To take the position that the predominant control issue has no relevance to IR35 is verging on the delusional.

Getting really tired of this circular argument, so two last points then I'll leave you to it...

In my current engagement, I decide where I work, how I work, what format the output takes, what resources I consume and what the eventual deliverable looks like. I decide how many days I charge for work done and to a large extent define what projects I work on. My client's only input is to say "We need to get 'this' done, how do we do it?". To say I'm not in control or that the client is controlling me is frankly ludicrous. So scratch your one-size-fits-all theory, even if I am the exception.

And the D&C/RoS/MoO combination vis-á-vis employment status was defined by the RMC case and still stands. You only need one to be proven and there is no hierarchy.

HTH. BIDI

[Rory Dwyer]

Getting really tired of this circular argument, so two last points then I'll leave you to it...

In my current engagement, I decide where I work, how I work, what format the output takes, what resources I consume and what the eventual deliverable looks like. I decide how many days I charge for work done and to a large extent define what projects I work on. My client's only input is to say "We need to get 'this' done, how do we do it?". To say I'm not in control or that the client is controlling me is frankly ludicrous. So scratch your one-size-fits-all theory, even if I am the exception.

And the D&C/RoS/MoO combination vis-á-vis employment status was defined by the RMC case and still stands. You only need one to be proven and there is no hierarchy.

HTH. BIDI

Dear Malvolio,

Maybe we are talking at cross purposes here. From what I understand of your situation, you are not under the pre dominant control of your hirer.

If that is the case, then you can not rely on the "Conduct Regs" as applicable legislation for protection. So it matters not if you opt in and by opting out you are making a specific declaration that you are not predominantly controlled.

That is all I am saying, and if that is so it would support your outside of IR35 argument. But you can't have you cake and eat it too.