Limited Company Contractors

On 6 April 2004 the government introduced the Conduct of Employment Agencies and Employment Businesses Regulations 2003 to raise standards within the recruitment industry. They stipulate how recruitment businesses should operate, providing added protection for work seekers and companies using the services of recruiters. From 6th July 2004 the Conduct Regulations extended to cover work seekers who supply their services through a limited company. In complying with the Conduct Regulations, a recruiter will allow Limited Company Contractors (LCCs) similar obligations to those workers engaged on a PAYE basis.

The Government has included a provision within the Regulations for the LCC to opt out as they have accepted that the Regulations may significantly jeopardise an LCCs tax position. The decision to opt out is likely to have implications for your tax position.

Under Inland Revenue IR35 rules there are a range of factors which are assessed by the Inland Revenue to determine whether an LCC is genuinely self employed, such as the contractual relationship between the parties, the level of control a client maintains over the LCC, financial risk taken by the LCC and length of engagement. If you decide you wish to enjoy the legal protections of the Regulations and be treated akin to a PAYE worker then the obligations owed to you by the recruiter may affect the assessment of your status for tax purposes under Inland Revenue tests of self-employment. If you are genuinely self-employed then you may wish to consider opting out so as to maintain your tax advantages.

Whether you decide to remain within the Regulations or to opt out it is a decision for you and we strongly urge you to seek independent tax advice. Once you have made the decision to opt in or opt out of the regulations, please let us know your decision in writing, either by email, fax or letter and we will send out the relevant legal paperwork relating to your assignment.