REC does a U-turn

Agents took a significant step in the right direction recently, as their representative body, REC, did a U-turn and indicated that they are drafting contracts which will reflect the self employed nature of the arrangement.

Agency body, REC (formerly FRES) bowed to pressure from contractors recently and indicated that they are drafting a contract for agencies that will reflect the self employed status of the arrangement with contractors.

Initially, REC had advised its members not to change the standard contracts, which were targeted by the Revenue as being within IR35. However, as more enlightened agencies decided to work with contractors and use modified contracts REC came under increasing pressure to adapt to the changing environment.

At a recent seminar (March 9), REC announced that their revised contract would be available shortly.

Andy White, former Chairman of the Professional Contractors Group, said: "The commercial reality is such that agents and clients who do not choose to make the change will discover that they have been left behind. More and more organisations are waking up to this fact and are changing sooner rather than later."

In January, as Chairman of the PCG, Andy White wrote to representative body, then FRES, to ask about their attitude to contract amendments. He pointed out that many of the PCG members were working in a relationship on the client's site which would meet the self employment tests or the relationship could be restructured so that they would meet the tests - not as a tax dodge or loophole, but as a genuine commercial relationship.

He warned REC (FRES): "Refusing to change your terms and conditions to truly reflect the relationship whilst also having restrictive clauses to prevent contractors moving to agents who will make the change could be considered anti-competitive. In view of your position as a trade association you could also be considered to be operating as a cartel."

The problem arose because contractors' contracts with agents have the characteristics of employment, as does the agent's contract with the client. At the time the Revenue had confirmed this was their way of thinking and it was later proved to be the case when the Revenue's guidelines stated that in their opinion the standard agency contracts of more than one month's duration would be caught by IR35.

PCG members were becoming concerned that their agencies were telling them that they had been advised by their representative bodies not to amend the terms and conditions of contracts as the implications of IR35 would not affect agencies. This was later confirmed by conversations with PCG members and FRES officials.

The Revenue also confirmed to the PCG that agents have informed them that they would not be changing their contracts.

However, PCG and its members spent a considerable amount of time and effort educating and lobbying agents and the representative bodies - and latest indications are that these groups are seeing the advantages to working with contractors and are revising contracts to reflect the true nature of the self employed arrangements.

A clear example of where PCG members 'have made a difference'.

The PCG's contracts for agents/clients and agents/consultants are now available for members' comments.