Agents were asked:
- How many contracts have changed since the introduction of IR35?
- Do you guarantee them as being outside of IR35?
- How many of your clients have changed contracts?
- Would you allow independent verification of all of the above where a firm of accountants would come in and look at the contracts?
Out of 32 IT contractor agencies contacted by Shout99.com, none could answer 'Yes' to the question: 'Do you guarantee any contracts will be outside of IR35?'
The survey showed a gulf between agents' attitudes towards changing contracts at the request of their contractors. Agency participation was generally either minimal or involved a complete re-draft of a standard contractor-agency contract whereby the agent had worked with accountants and organisations like the PCG to devise what they saw as the best possible chance of getting their contractors outside the legislation.
The survey results showed a difference between clients who are prepared to work 'all-out' with an agency to help get contractors outside of IR35 and those who are simply not interested.
Feedback received from many agents suggested they had pushed their client as far as they dared to help them understand the implications of not changing a contract on their contractors' businesses. A few agents said they were pleasantly surprised by the interest their clients had taken in working with them to re-draft contracts and some had gone Ďabove and beyond the call of duty to provide assistance to contractors fearful of the uncertainty surrounding IR35.' Other agents reported clients were taking a more 'hands free' attitude.
|"The last thing we want is to have the Revenue on our backs... telling contractors there is such a thing as an 'IR35-proof' contract"|
|Robert Davey, Financial Director of Euro Search and Selection|
Of all of the responses received by Shout99.com, the one universal finding was that none of them could obtain enough certainty over their 'IR35-friendly' contracts to stake a guarantee that a contractor who worked with them would be outside the legislation.
Diane Costello from Abraxas, said: "No, we can't guarantee that. What we've done so far is the best we can do legally. We've even had training from financial and legal institutions, but it seems 99 per cent of contractors will be caught. We're making a real effort to get them outside IR35 though."
Robert Davey, Financial Director of Euro Search and Selection, said: "There are no guarantees whatsoever that these contracts will escape IR35. I've written papers for our contractors warning them of the dangers, the liability and the fact the Revenue could chase them up.
"We've only got about 80 contractors on our books as the numbers are down at the moment. I would say about 10-15 per cent of the contracts have been changed- we've put in some changes, but only in situations where there has been a bona fide case for the contractor to be on a 'self-employed' basis- this is decided by the type of work they're doing and the way they work. It really only applies to the high-end contractors. The last thing we want is to have the Revenue on our backs over this- and we don't want to kid our contractors there is such a thing as an 'IR35-proof' contract."
|"There are so many contractors out there. I put out one project this morning at 10am and within hours I've had 120 applications; 95 per cent met the relevant criteria"|
|Joe Devito, Aston Carter|
Richard White of Apex Computer Recruitment said of his 500 contractors, 30 had had their contracts changed by the in-house legal team and that they had signed an agreement accepting the agency wouldn't accept IR35 liability.
Joe Devito from Aston Carter said: "It's not our responsibility to make sure contractors are outside IR35 so there are no guarantees. We help as much as possible but the employers are the big banks and we must obey their contracts. We're making as much effort as possible because we want to be attractive to contractors, there are just so many about at the moment. I put out one project this morning at 10am and in the last few hours I've had maybe 120 applications for it; 95 per cent of those who applied met the relevant experience and criteria.
"All of our contractors are on the same contract- only the notice periods are different. They're all set up to be IR35-friendly. It's the contract with the client that is tweaked. If it's a big company like Deutsche Bank or Merrill Lynch we sign their contract- if it's a small company then they sign ours. We won't deal with any contractors who operate via offshore accounts because of the liability potential- they must have their own Ltd. company."
Many agencies vented their frustration at the difference between the willingness of the agency to help contractors escape IR35 and the somewhat less substantive efforts of their clients.
Paul Woodridge from IT Resourcing UK said that no contracts had changed with clients since the introduction of IR35. He added: "They don't see it as being their problem- I've tried to help but there's been no movement- it's in my best interests to keep a good rapport with my contractors."
Gavin Tag from Best International said: "Possibly hundreds [of contracts had changed] as a result of specific requests from contractors- but they have to go through the client first. The changes are mainly to project-based contracts involving new standard terms. I'm probably getting one request every day or two days from contractors who think their contracts will be helped by clause changes.
"We can't guarantee them seeing as there's no such thing as an IR35-proof contract. Our standard terms and conditions are as IR35- friendly as possible without prejudicing the client who's paying the money. We do what we can, if we can help- we'll do so.
|"Some clients are proactive; others don't want to know. One very large client of ours has absolutely excelled in taking an interest and trying to help"|
|Gavin Tag, Best International|
"20-30 client contracts have changed, perhaps. There are no unfettered clauses on one side but not on the client side, because then the Revenue would hammer us. We try to educate clients if they want to help contractors. Some are proactive; others don't want to know- one very large client of ours has absolutely excelled in taking an interest and trying to help."
Harvey Nash said that few of its contracts had changed because of collusion, which the spokesman said was its 'key fear' when making contract changes.
He said: "We've done our best to make the contracts IR35-friendly. If the client is happy to make changes to project schedules and the like then it's ok, but otherwise no, we won't change them. In any case the contracts have to be the same on both sides."
On the question of whether Harvey Nash could guarantee a contract, he said: "Absolutely not- I don't think you can. Some contractors have gone through their local Revenue offices to have their contracts reviewed- but it seems to depend on area- each office seems to have its own pet clause, e.g. substitution.
"Very few client contracts have changed. Most are intractable. We've tried to educate clients to make them aware of these issues but it's too much like hard work for most of them."
|"Some contractors have gone through their local Revenue offices to have their contracts reviewed. Each office seems to have its own pet clause, like 'substitution', etc... depending on area"|
|A spokesman for Harvey Nash|
Keith Boatman from Bite Solutions said clients had not felt the pressure to change contracts since September 11, adding that he thought more contracts would begin to change to business-to-business when the markets pick back up again.
Many agencies said they had based their contracts on the draft contracts made available by the PCG legal team and others said they were hopeful the Group's case law strategy would bring them more clarity.
Steve Heywood from Compucare Group said: "We cannot guarantee any contracts but the PCG's case law campaign should get some more clarity for us- until then we remain in the dark."
David Giles from Contracts Consultancy said: "About 50 per cent of our clients contracts have changed. Most clients aren't interested in helping contractors but we allow contractors to draft their own contracts using PCG info, etc... and they make them as IR35-friendly as they can. The best situation tends to be in France where our UK contractors are all deemed to be outside IR35 despite it being a very unfriendly country to the self-employed. We're very happy to place contractors there but the weak Euro can be a problem."
Mark McCrumb of First People Solutions said: "100 per cent of our contracts have changed- we use a PCG endorsed contract that the lawyers have said is as good as it gets. Not one of our contracts has been caught since we began using this across a number of different sectors, not just IT. PCG has been great!"
There were also a few instances of agents' best efforts to change contracts to be IR35-friendly not working out.
|"We cannot guarantee any contracts at the moment but the PCG's case law campaign should get some more clarity for us- until then we remain in the dark"|
|Steve Heywood, Compucare Group|
Consult RS said despite their drafting of an IR35- friendly contract take up amongst contractors had been low.
John Cashman of Lexstra said: "100 per cent of our contracts have changed. We had a re-draft that was very IR35-friendly, but its substitution clause was abused by a contractor so we subsequently reverted back to our previous, harsher contracts- although they remain 'business-to-business.' Changing clauses builds our workload dramatically though and doesn't make good business sense."
David Parsons from Coral estimated 75-80 per cent of its contracts had changed. He said: "We had what we thought was an IR35-proof contract until one of our contractors ran it past the Revenue Contract Review Service and it came back as a blanket 'inside.'"
Many of the agencies that replied 'No' to allowing independent verification of their contracts said they did so because of issues of confidentiality.
The following table lists agencies' answers to Shout99.com's four questions...
|Name of Agency ||How many contracts have changed? ||Do you guarantee them? ||How many clients have changed contracts? ||Would you allow independent verification by an accountant? |
|2000 Group ||20 per cent ||No ||Less than 20 per cent ||No |
|Abraxas ||100 per cent ||No ||No figure given ||Yes |
|Allomax ||20 per cent ||No ||None ||Yes |
|Apex Computer Recruitment ||6 per cent ||No ||None ||No answer given |
|Armadillo UK ||Several contracts ||No ||100 per cent ||Yes |
|Aston Carter ||100 per cent ||No ||None ||Yes |
|Best International ||100s at the rate of one every day or second day ||No ||20-30 ||No answer given |
|Bite Solutions ||100 per cent ||No ||Not many ||No |
|Butler International || |
Less than 5 per cent of established contractors
Between 10-15 per cent for new ones
|No ||Less than 5 per cent ||Yes |
|Compucare Group ||100 per cent ||No ||50 per cent ||Yes |
|Computer Futures ||100 per cent ||No ||30 per cent ||Yes |
|Consult RS ||20 contracts ||No ||None ||No answer given |
|Contracts Consultancy ||100 per cent ||No ||50 per cent ||Yes |
|Coral ||75-80 per cent ||No ||33 per cent ||No |
|Euro Search and Selection ||10-15 per cent ||No ||5 per cent ||Yes |
|Euro Technique IT ||60 per cent ||No ||10 per cent ||Yes |
|First People Solutions ||100 per cent ||No ||100 per cent ||No |
|GCS Computer Recruitment ||Less than 10 per cent ||No ||Very, very few ||No |
|Harvey Nash ||Not many ||No ||Very few ||Yes |
|Huxley Associates ||20 per cent ||No ||None ||No |
|IT Resourcing UK ||100 per cent ||No ||None ||No |
|Leotel ||100 per cent ||No ||100 per cent ||Yes |
|Lexstra ||100 per cent ||No ||None ||No |
|Matchmaker Personnel ||15-20 per cent ||No ||10 per cent ||Yes |
|Mind Consultancy ||15 per cent ||No ||15 per cent ||No |
|Modis ||60 per cent ||No ||60 per cent ||Yes |
|Melville Craig Group ||75 per cent ||No ||Very few ||No |
|Pacific International ||Under 10 per cent ||No ||Under 10 per cent ||Yes |
|Pendragon-IS ||100 per cent ||No ||60 per cent ||Yes |
|Preferred IT ||30 per cent ||No ||30 per cent ||Yes |
|Raeburn Associates ||66 per cent ||No ||66 per cent ||Yes |
|Square One Resourcing ||15 per cent ||No ||5 per cent ||No answer given |
Richard Powell, © Shout99.com 2002