Agency regulations revisited

To opt in or out of the agency regs?

An agency recently sent our company an opt out form for the above regulations with the advice that an opt out was consistent with working outside IR35 and not opting out consistent with working inside IR35. I am a member of FO35 but do not recall seeing any advice on this matter.

Could you please clarify the following:

1) It is my understanding that the opt out is signed on behalf of the limited company seeking the work (not by each individual employee of the company) is this correct?

2) What is the scope of the opt out (e.g. per contract, for all dealings with an agency, for each agency-client combination or a once off company declaration)?

3) These regulations only appear to apply if there is 'control'. What degree of control is required and how do they relate to the tests of control used for IR35 purposes.

4) Have the Inland Revenue given any view on how the opt out affects IR35?

5) In recent times I have worked alongside employees of large consultancies, the consultancies have themselves obtained the work via other large consultancies. Would I be correct in supposing that if the regulations applied to my company they would equally apply to large consultancies (e.g. a Microsoft gold partner obtaining work via Microsoft?). If not could you explain why.

6) It would appear that the presence of the opt out has changed the nature of the whole legislation as far as limited companies are concerned. Without an opt out the legislation would have applied across the board and if the IR were to have claimed it was an indicator for working inside IR35 then they would effectively change the essence of what a limited company is causing widespread ramifications. By having an opt out the IR can now argue that not opting out is an indicator of working inside IR35. Can you please explain the value of the opt out clause as I can only see costs.

7) It is clear (I think) that by opting out the company forgoes any benefits this legislation may offer, it is not so clear what exactly you gain from opting out. Let me put it this way: These regulations specifically take into account limited companies and it must be expected that a proportion of those companies will, with the agreement of the Inland Revenue, be operating outside IR35. It would appear that the intention of the legislation was to give some protection to small companies (who do not have the clout of larger organisations) irrespective of their IR35 status. If by not opting out you are deemed by the IR to be more likely to be working inside IR35 then what are you actually saying when you opt out? (other than we don't know what the effect of staying in might have so it's better to opt out).

8) In your opinion is opting out likely to have an effect either way on IR35 status disputes

It appears to me that the existence of the opt out clause has left contractors in a more tenuous position and to have played into the hands of those in the industry (some agencies, clients etc) who don't want to rock the boat and potentially got the Government out of a difficult position.

Without the opt out the IR would have had to address the problem head on or concede that it was neutral as an IR35 indicator leaving contractors with the benefits the legislation offers. This may have been an incentive for the end clients, who don't seem to have changed a bit since IR35 was introduced, to address the 'control' issue resulting in more contractors being outside the agency legislation and as a by product outside IR35. It was very astute of the Inland Revenue to place the onus for IR35 on the contractor so it seems like something of a home goal for a contractors group to actively pursue a measure that appears to exacerbate the whole situation.

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BobE