Issue 33; 12 December 1999

Paymaster General Meeting | Agency claims | CBI Joins PCG as Associate | Legal Opinion | Nurses Comparison | Background Information

PCG meeting with Paymaster General
PCG Chairman, Andy White and PCG member, Philip Ross, (Philip spoke at the Labour Party Conference on the Knowledge based Economy) were invited to a meeting with the Paymaster General, Dawn Primarolo, on Thursday (December 9). The meeting, which overran by 20 minutes, gave PCG the opportunity to explain the working of the knowledge-based economy and the problems associated with trying to apply the self-employment tests to a sector which has never operated in this manner.

During the meeting, there was a 'full and frank exchange of views' and it concluded with a promise that PCG would submit its proposals on IR35 to Ms Primarolo. The notes of the meeting are available to PCG members in the filestore.

The executive of PCG will be meeting this Tuesday to produce a paper for the committee and members' consideration and approval before submitting it to the Minister.

'It'll be alright on the night', claim some agencies
At the moment, the ink is not even wet on the detail of these proposals, yet some agents and their partner "contractor accountants" appear to have folded their tent and given up. However, during the week they were 'striking camp', the PCG was in direct discussions with the Paymaster General - an indication that the game is still very much on as far as PCG is concerned.

At the second Revenue meeting held recently, Simon Sweetman of the FSB reported in his minutes (available on filestore) that "Sarah Walker of the Revenue said that they had looked at the standard agency contracts and felt that these largely had the characteristics of employment. The agencies have said they have no intention of changing them."

So even if you felt you were able to pass the self employment tests as they currently stand, the agents' contracts seem to present a danger that you would not. ATSCo did not attend either of the two IR "public consultation meetings", but asked the Revenue for its own meeting, so the assumption is that this statement has come from them or some of their members.

ATSCo, in a submission to the Inland Revenue have stated that with some minor changes on expenses IR 35 'should not present any fundamental problems for IT contractors'. The PCG rejects that view.

On the ATSCo website they state. "ATSCo was formed with 16 founder members, representing over two billion pounds of turnover, each bringing an individual corporate style plus a shared vision for an industry respected for its quality, service and results." We would question with their present approach to their clients (the contractor) how much longer that turnover will be "over two billion pounds".

Chairman of PCG, Andy White, wrote to Peter Searle of Computer People and ATSCo back in September of this year. He concluded: "I feel it important that contractors and agents work together on this important issue. We are certainly working closely with FRES and we would welcome more direct contact with your group. Perhaps you could call me to discuss this further after you have studied and discussed with your colleagues at ATSCo." We followed up with a call to Ann Swain (CEO of ATSCo) to chase this, but no reply has been received. Hardly surprising with what they had planned.

If choosing your next agent you may wish to note the 16 founder members of ATSCo: Abraxas, Alexander Mean Group, Apex Computer, Recruitment, Computer Futures, Computer People, Elan, Glotel, Harvey Nash, Hutchinsons Smith, Lorien, Manpower, Modis International, MSB International,Parity Resources, QA Myriad and Spring IT Personnel. See http://www.atsco.org for more information.

Ian Sutherland of 360 Group. A firm of "Contractor Accountant" who apparently work in partnership with a number of agencies including ATSCo members states "What is the Current Position on IR35?" he answer his own question with "Contracting via a Limited Company will still remain the most viable option for Contractors who wish to maximise their income."

Contractors should be wary of taking this at face value. The PCG has always believed - as have the vast majority of its members - that contracting via a limited company is the most viable option for contractors who wish to build and develop their businesses.

For contractors who pass the IR35 tests - in whatever form they eventually emerge - that will be the case. But for those contractors who fail the IR35 high jump or choose to become an employee of their client, remaining as a limited company has a serious downside.

PCG's own accountant, Kevin Miller, has done a detailed analysis of pre and post IR35 and shows that for those contractors who do not consider themselves employees of the client that failing the IR35 tests will effectively put them out of business as they would be forced into a loss. (See File store for report)

For those contractors who consider themselves employees of their client, but maybe were persuaded to leave permanent employment and set up their own PSC, then as a typical IT contractor, they are going to see a drop in take home pay of around 10,000 pounds. (ten thousand pounds sterling) Of course if they continue through the PSC, as both the agent and contractor accountant would like, then they will probably not have access to any of the benefits afforded to a real employee of the client. "All the pain and no gain" as they say.

Andy White, PCG's Chairman, said: "From the beginning, we have been trying to engage in a positive and constructive dialogue with agents in order that they can become involved in assisting contractors in their battle against the disproportionate and damaging efforts of IR35.

"We are delighted that some of the small and medium sized agencies have joined PCG as associate members and are adding weight to the campaign. However, it would appear that some agencies are giving advice which is irresponsible, duplicitous and self-serving."

"Perhaps there was an assumption that in the days when contractors did not have their own representative body, there was scope for this advice. However, those days are now numbered."

Many contractors are choosing not to extend their contracts beyond April because of the uncertainty surrounding IR35 and the implications for the future. Many contractors are also starting to question the advice they have been getting. When talking to agents or their partner "contractor accountants" many report that consultants are telling them not to worry as someone senior in their company has access to 'sources close to the Government' or 'has influence in high quarters'.

They will often not mention the PCG and give every impression that matters are under control. There is a strong whiff of French cattle-feed coming out from these companies. Contractors brought up on the classic "there is going to be to be unlimited hours" have a fine nose for this BS and the result has been an upsurge in membership of the PCG.

CBI - New boys on the block
PCG membership doubled in the first six months of operation and on trends is expected to double again in the next six months. It is believed to be the fastest rate of growth of any representative body within the UK and the PCG is pleased to welcome the Confederation of British Industry (CBI) as its most recent associate member. They join the Institute of Chartered Accountants (ICAEW) and others.

Legal opinion
PCG's own retained lawyers, have researched the existing case law into self-employment tests and their precedence in the knowledge-based sector and found that none exist.

Tony Askham, who conducted the research said: "It supports the argument conclusively that there are no knowledge-based industries involved in this test."

PCG has also had a case conference with a leading tax barrister. In his written submission, he concludes that "The fundamental problem with the IR35 proposals is the use of the case law test for employment/self employment. This will cause a great deal of uncertainty."

Both documents are available to members in the file store.

Comparison with nurses
The Government has made much of the comparison between the NI paid by a nurse and that of an IT contractor.

PCG research has shown that a nurse working through a nursing bank has case law to give her the certainty that she is self-employed - unlike a knowledge-based contractor.

The PCG has conducted a survey amongst its members which, provisionally, shows that 50 per cent of businesses would fall into the 'Charlotte' (Fictitious name given to Revenue example) Grey area and the other 50 per cent would be forced into 'employment' when they have been operating as businesses. Link to Survey Report.

Kind regards
Susie Hughes
Press Officer for the PCG

>File store

BACKGROUND INFORMATION
The Professional Contractors Group (PCG) was formed in May 1999 and is one of the fastest growing Representative Groups in the UK. Membership is invited from Contractors in the Knowledge based sector (mainly IT and Engineering).

Initially formed to Campaign on the issues raised by IR 35, the scope has now been broadened following an Internet ballot of members and the annual subscription of 100 pounds is used to fund a non-profit making organisation run by a Committee of unpaid volunteers drawn from the membership. They in turn are supported by an Executive team comprising of Legal, Accounting, PR, Lobbying, Internet and Office administration personnel who work within agreed, published, budgets.

These experts are drawn from outside existing Industry suppliers to ensure impartiality and a high degree of independent advice. This advice is imparted via the members file store and also through an on-line discussion forum. This also allows the rapid dissemination of information concerning issues affecting Contractors. Key issues are voted upon via an Internet ballot system of all members ensuring a high degree of accountability. As a result it is recommended that Contractors considering joining should have Internet access and they must have an email address.

Associate membership is also available to Clients, Agents, Accountants and representative bodies who would support the aims of the PCG. The subscription of 250 pounds allows access to the Filestore. No further advertising (including banner adverts) is allowed and the only differentiation is the date the Associate Member joined. The earlier the membership the nearest the top of the list. Members will shortly be able to review a list of the Associate Membership together with contact details and future development is planned to add services for the mutual benefit of both classes of Membership.

Associate Membership does not carry voting rights and the funds raised from Associate subscriptions will be used for the development of these mutual services and to establish a legal "fighting fund". It will not be used to fund the core organisation, to ensure that the PCG can be fully funded by Contractors only, guaranteeing complete independence.

You can join the PCG (use the online joining form) at https://www.pcgroup.org.uk/join.html. We can accept credit card payment on line via our secure server. This allows immediate access. Alternatively you can pay by Cheque, but this will not allow access until funds are cleared. We reserve the right to refuse membership for any reason and may carry out random checks of membership applications. Full terms and conditions are available on the site for review.

This email newsletter is published free of charge by the PCG, please forward onto your colleagues.

Agents and Accountants that support the aims of the PCG please copy this email to your Contractors and your clients.