This self-complete checklist is designed to help you assess ... - PCG

This self-complete checklist is designed to help you assess the extent to which yourAgency Contract meets the PCG Approved Agency Scheme guidelines.For further guidance on any issues please see our Approved Contract Scheme fact sheetor alternatively contact Mandie Bell on 0208 897 9970A ‘yes’ is required to each point in this section, if the contract is to secure approvalagainst the requirements of the PCG Approved Agency Scheme.Issue Explanations (if required) YES/NOAre the agency and the limitedcompany the only parties (ieexcluding the individual)Are permitted expenses cateredfor?Are timesheet provisions clearand reasonable?Is your company able tosuspend services for holidays?Is any „Handcuff‟ clausereasonable?Can both you and your companyaccept concurrent contractswith other clients?Are the payment termsreasonable?Can your company terminatethe contract in the event ofmaterial breach by the Agency?Can your company terminatethe contract if the Agencybecomes insolvent?You yourself should not personally be a party to the contract;the relationship should be clearly defined as Business toBusiness.There should be clarity on who bears any expenses, and (if anyare to be chargeable) the contract should specify a suitablepayment mechanism.If the clauses requiring timesheets provide for signature by aclient authorised representative, such signature shouldconclusively entitle your company to payment, in the absenceof reasonable cause.Your company should be able to suspend services when you areon holiday, either by virtue of an express provision, or byimplication; this requirement would generally be satisfied by aright to substitute.The longer of (i) 6 months, and (ii) the contract duration (max:12 months) should generally be regarded as the maximumacceptable period.Neither you nor your company should be unreasonablyrestricted from being able to offer services to other clients.Contract should specify payment terms; these shall not exceed30 days; and no other unreasonable provision (which mightdelay or interfere with payment) should be present.There should be express provision for your company to be ableto terminate the contract in the event of material breach by theagency (including non-payment of invoices).There should be express provision for your company to be ableto terminate the contract in the event of the agency becominginsolvent.

Issue Explanations (if required) YES/NOCan your company terminatethe contract on giving notice ofa reasonable period?Are any clauses requiring you oryour company to act in the bestinterest of the clientreasonable?Are Professional Standards andperformance requirementsreasonable?Are Liability and Limitationrequirements reasonable?Are Confidentialityrequirements reasonable?Is Copyright & IntellectualProperty provision adequate?Are suitable provisions madefor variations to contract?Is there a suitable GoverningLaw e.g. English Law, stated inthe contract?Are all other commercial termsreasonable?Your company should be able to terminate the contract with anotice period not exceeding one month.If any clauses are present that require your company or youpersonally to act in the best interest of the client, they shouldnot be reasonable.Any such provisions should not be unreasonable.Where there is a liability provision, it shall be reasonable; andwhere an amount of required or advised insurance cover isspecified, total liability shall be limited to that amount.Such provisions should not be unreasonable and should excludeinformation already known to you (independent of anydisclosure by the client), and should exclude information in thepublic domain.Contract should make clear that ownership of any of your/yourcompany’s own IPR which you may intend to use with theClient’s agreement in the course of the contract should retainedby you/your companyContract should expressly say that any change should be inwriting and signed by both parties.Contract should make clear what law is intended to apply to it.This could include anything that seems either out of place in acontract of this type, and/or which is commercially unbalancedto a point where it significantly changes the obligations or risks,or that you do not understand, or of which you do notunderstand the implications

Now please read through the following section and answer accordingly.The extent to which the contract satisfies the generally accepted tests for IR35friendliness should be considered, with particular reference to the aspects set out in thequestions below.Whilst naturally desirable, it is not always necessary for there to be a ‘yes’ on eachindividual question, provided the overall position indicates at least a ‘probable yes’.For example, it is understood that there are many scenarios where substitution isunrealistic. A ‘no’ on that issue alone would not necessarily result in the contract beingconsidered to fail, provided the other aspects relevant to IR35 were sufficiently strong,and showed a clear intent for a ‘non-employment’ type of relationship between theindividual contractor and the client.Issue Requirements Yes/NoIs the contractclearly “forservices” ratherthan “of service”?Is a provision forsubstitutionclearly defined?Is there Mutualityof Obligationbetween you andthe Client?The services you are to provide should be specified as such, and not by reference toa role or position titleYou should have a substantially unfettered right to substitute – ie without priorapproval, subject only to a right of the client to object to any individual onreasonable and objectively defined grounds, and on the basis that you remainresponsible for sourcing and paying the substitute, and for the overall quality ofwork.Basic: There should be no obligation on you as an individual to provide servicespersonally, and no unqualified reciprocal obligation to pay for services actuallyprovided 2 .Extended: The basis for payment shall be for services actually provided, withoutany obligation on the part of the agency to provide work or pay in lieu, and withoutany obligation on your part to accept and undertake such work as may be offered.In particular, the contract should not entitle you to payment in lieu of notice. 3Are there nounreasonableControl elementsenshrined in thecontract?The particular interest here is control of a particular type – whether you agree ‘thatin the performance of the service you will be subject to the other’s control in asufficient degree to make that other master.’ The degree of control should becapable of being distinguished from an employee undertaking similar tasks.Your position should be that of an independent professional, accepting responsibilityfor the services you provide, and not subject to the direction and control of theClient, save where a necessary consequence of the services themselves1 IR35 status is defined not just by contractual terms, but also working relationships. It is advisable to confirmworking relationships in a Real Arrangement Letter – see PCG Guide to IR352 In the absence of mutuality at this Basic level, the authorities suggest that the hypothetical relationshipimposed by the legislation cannot be one of ‘employment’.3 Absence of mutuality at this extended level would generally be regarded as a pointer away from thehypothetical relationship imposed by the legislation being one of ‘employment’. Where there is a degree ofmutuality at both levels, it would generally be regarded as a pointer towards the hypothetical relationshipbeing one of ‘employment’

Issue Requirements Yes/NoOtherThe other characteristics of the relationship, as evidenced by thecontract, shall present a picture of a person in business on his ownaccount 4 .The other provisions of the contract shall be more consistent with aself-employed relationship than with employmentIf (as is generally the case) the agency-client contract is notintended to be disclosed to the contractor, the agency-contractorcontract should include assurances (a) that it accurately reflects allprovisions in the agency-client contract which are intended to bebinding on the contractor, and (b) that no provision in the agencyclientcontract is inconsistent with the intended relationship (asexpressed in this contract) between the contractor and client.Never not lose sight of the fact that contract terms are but one element of the IR35assessment, and the contract terms may be ineffective in achieving an outside IR35position if the parties (particularly the Individual and the Client) conduct theirrelationship in a manner inconsistent with those terms!It is for the parties entering any particular contract to satisfy themselves that itadequately reflects their intended commercial intent, and it is the responsibility of themember company to correctly assess the IR35 position in relation to any particularcontract, and to account for tax accordingly, after taking such expert advice as isconsidered appropriate.Please bear in mind that this Checklist is intended for general guidance only, and canonly indicate whether the contract may be considered to comply with the PCG ApprovedAgency Scheme guidelines. It should not be relied on when taking a decision as tothe IR35 status of any particular engagement. No responsibility is accepted by thePCG for any decisions taken on the basis of this Checklist.4 This may include such factors as Equipment Helpers financial risk / opportunity to profit from soundmanagement responsibility for investment and management degree of integration (‘part & parcel’) degree of control termination provisions mutual intentions