For months, the PCG's two law firms have been working on draft contracts, which would reflect the true, self-employed nature of the arrangement the contractor has with his or her client and agent. The PCG widely consulted and allowed members and associate members to comment.

It is very straightforward to write a contract that will demonstrate self-employment status. The key challenge has been to write a contract that will be acceptable to Contractor, Client and/or Agent. Substitution for example; A key self-employment indicator. The clause settled on is drawn from experience of an existing clause in operation with a Government contract. As someone who has worked as a Client, Agent and Contractor I believe the balance is right and the endorsement of a Revenue stamp of approval will provide much needed certainty. This was for a contract based on hourly rate and working on a client’s site. As they say ‘One swallow does not make a Summer’, but it is a very significant step forward.

1) Client , Agent and Contractor have agreed to change the relationship and describe this using the PCG sample Contract.

2) This has been approved by the Revenue

Contractors need to ensure that the ‘written terms reflect the true arrangements’. If the Revenue carry out a status investigation they can ask to meet with both Client and Contractor. Their internal manual (Copy available on the PCG members site) has some 60 questions of which only three relate to the Contract. The objective is to test the reality of the situation. Mentor, who are retained by the PCG Tax expense insurers to handle Status investigations, are staffed by ex Inland Revenue Inspectors. I talked with one of their staff (he has personally dealt successfully with over 80 Status cases). The only Status case he has had a problem with was due to the Client giving a different story from that stated by the 'Contractor'.

Consider this received from an Agent.

Spoke with (Client name withheld) about IR35 – said that they are not changing their contracts at all and has not had one approach from any agency to do so. Said that any agency trying to change the contract would not be conducting business with them for much longer. Said none of their contractors would pass IR35.

I have seen some advice stating that the Contractor need only worry about the Contract between themselves and the Agent. I wish this were the case, but look at the information from the Client above and consider if an Agent, working with this client, was tempted to listen to this advice and provide an IR 35 proof Contract. In the event that a Status Investigation was carried out, who would be liable for the Tax and Penalties?

The Accountant or Lawyer providing the Contract

The Agent signing it

The Contractor

Unfortunately it would be the Contractor.

It might be 18 months to 2 years before this would come to light and therefore the watchword is very much ‘Caveat Emptor’, (Buyer beware). I would hope that an Agent offering IR 35 proof contracts will have no problem adopting an open book policy to allow the Contractor sight of the Contract describing the relationship between the Agent and Clients. Alternatively if the Agent is unwilling to adopt this policy then ask them or the Accountant, to provide an indemnity against the tax and penalties if the actual relationship on the Clients site is different from that described in the Contract between Agent and Contractor.