TECHNICAL & LEGAL GUIDE

Transcription

1 APRIL 2016 Risk Free THE RISK FREE EMPLOYED INCOME MODEL TECHNICAL & LEGAL GUIDE ALL SECTORS

2 Risk Free The Risk Free Employed Income Model To help agency directors and consultants fully understand the new (Direction, Supervision or Control) payroll model, RACS Group has published this technical and legal guide to support the product. Included are various commonly asked questions and answers, plus a copy of a letter from our bankers illustrating how we manage client funds, a sample of a Contract of Employment, an Administration Services Agreement and a copy of the Articles of Association. We have extensively researched and tested every aspect of the product to ensure fully protects the commercial interests of both temporary recruitment agencies and contractors. Throughout the development and launch of the model, RACS Group has drawn on the expertise and experience of respected industry commentators including Professional Passport, Osborne Clarke and leading tax Counsel. We have highlighted the important legal issues and the advice and answers we have received. We trust this guide will assist you to add to your product portfolio, but please do not hesitate to contact us if you need any further information. RACS Group s business development team is available to meet with you at any time and provide free training workshops for your consultants. We look forward to hearing from you in due course. Terry Hillier Managing Director RACS Group Contents - The Technical & Legal Bits Page 3-7 Assurances & Indemnities Page 8-9 Confirmation Letter From Barclays Page 10 Agreement regarding client account Page 11 Contract of Employment Page Administration Services Agreement Page Articles of Association Page Compliance & Professional Credentials Page

3 ALL SECTORS - The Technical & Legal Bits What is? (Direction, Supervision or Control) utilises a Personal Service Company (PSC) - an Incorporated Limited Company in England & Wales, with a single Company Director, Shareholder and Sole Employee (who are all one and the same person). is purely our product brand name used to distinguish it from our classic PSC offering, RACS PSC. How do we define the model? assumes that the contractor is caught by IR35 and thus is paid nothing other than employment income after all allowable expenses have been accounted for. We believe that future reviews and amendments of IR35 will not affect this model. (Condition 3 of MSC Guidance & ITEPA s 61B, in particular s 61B(1)(c) will not therefore be fulfilled). Legal issue: Answer: The model is not intended as a device for reduction of tax and NIC. It is a method of removing from agencies and end users the risks of workers gaining full employment status, AWR and other rights. Full compliance with all tax and NIC legislation is intended. The arrangements will be within IR35 but no payments will be made other than as employment income: in particular there will be no shareholder dividends avoiding PAYE and NIC. Allowable expenses are those that are allowable for Corporation Tax purposes only. These include, but are not limited to: insurance premiums, service fee plus VAT recovered per payroll period; accountant s fees, travel, specialist equipment, professional subscriptions recovered annually via self-assessment return. All expense claims will be reviewed by our team of experts before any submission to safeguard the DSC. Advice: I agree that business travel expense reimbursement (other than those prohibited under the new travel and subsistence requirements ) constitutes employment income for the purposes of IR35 even if exempt (new s 289A). This is because expenses are treated as earnings (ITEPA Part 3 Ch 3 s72(1)) and employment income means (see s 7(2)(b)) any amount treated as earnings under inter alia Part 3 Ch 3 (see s 7(5)(b)). There is no carve-out from s7(2) of exempt income, in contrast with the definition of general earnings in s7(3), where exempt income is excluded

4 Risk Free The new Travel and Subsistence (T&S) rules [to be introduced from April 2016 (ITEPA S339A) and to be named the Finance Act 2016] will not be considered under and therefore will not be allowed. All parties joining will automatically be deemed to be under the Supervision, Direction or Control (SDC) of the engager as detailed within the said Act. The Articles of Association for each DSC will prohibit the issue of shareholder dividends, any loans, bonuses and any return of capital. All income will be paid as employed income. Advice: It is appropriate to ensure that there is no right in any circumstances to receive such a non-employment income payment (s 50(1)(b(ii)). So the Articles of the company and the service agreement should provide that no dividends or other distributions may be made to the single employee shareholder, including loans, bonuses and returns of capital. The only way in which value can be advanced to the individual must be by way of employment income. There should be a gift over to charity (not to an associate) of any potential surplus on winding up (none being expected). Who is the agent? RACS Collective (UK) Ltd (RCUK) will act as the accounting agent for each individual DSC (for the purposes of HM Revenue & Customs [64-8]). is NOT caught under MSC Legislation. Advice: I agree that while RCUK will be a provider of managed service companies in a general sense, the PSC will not be a managed service company in the highly technical tax sense of ITEPA s 61B because s 61B(1)(c) will not be fulfilled (i.e. no increased receipts over what would otherwise be paid as employment income). Further s61d(1)(c) (receipt of a payment which is not earnings) will not be met, so there should be no deemed employment payment. RCUK is NOT a Managed Service Company Provider. Advice: RCUK will provide a managed personal service company arrangement. RCUK will not be an MSC provider. 4

5 ALL SECTORS The Administration Services Agreement will provide: RCUK will be authorised to ensure that all payments can only be made by way of employment income after the deduction of all allowable expenses. After each payment run there will be no profit within the DSC. Advice: ( increased receipts over what would otherwise be paid as employment income). Further s61d(1)(c) (receipt of a payment which is not earnings) will not be met, so there should be no deemed employment payment. RCUK will be authorised to (where applicable) or obliged to (depending upon turnover) register the DSC for Standard Rate VAT, although the default position will be non VAT registered. Flat Rate VAT may be an option. An application must be made for acceptance on the Flat Rate VAT scheme (FRS) at the express instruction of the Director of the DSC. RCUK will be authorised to raise invoices for and on behalf of each DSC by way of a universal schedule to each client of the DSC. In summary: only one payment needs to be made to RCUK totalling the schedule amount. This will act as a self-bill type arrangement. RCUK will receive monies directly into a designated client account. This account is protected under ESCROW* rules and is technically ring-fenced for the purposes of paying HM Revenue & Customs all that is due from the DSC monies in an accurate and timely manner. Advice: I do not consider that use of the RCUK client account endangers the tax position of RCUK, the PSCs or the agencies. * ESCROW Account: A financial instrument held by a third party on behalf of the other two parties in a transaction. The funds are held by the escrow service until it receives the appropriate written or oral instructions or until obligations have been fulfilled. Securities, funds and other assets can be held in escrow. RCUK will be authorised to process all payroll calculations in accordance with services being provided within IR35. Payroll will be paid as full (PAYE) employment income to the Director and Employee of the DSC. There will be no surplus funds available in the DSC after each payroll run. Therefore a profit cannot be demonstrated and thus a dividend can never be declared

6 Risk Free Advice: There is intended to be no income that is not employment income (for the purposes of IR35, see ITEPA s 50(1)(b). It is intended that the PSC will distribute all its surplus funds as employment income. It is appropriate to ensure that there is no right in any circumstances to receive such a non-employment income payment (s 50(1)(b(ii)). The only way in which value can be advanced to the individual must be by way of employment income. All net payroll amounts will be paid directly into the Employee s personal bank account on behalf of each DSC. Insurances will be sought at competitive prices and allocated to each DSC should they so require them. Advice: On formulaic provision of insurance, I see no additional risk. On a separate insurance point, I consider that provision of permanent health insurance will not be a taxable benefit in kind; I initially overlooked an express exclusion from the benefits code under s 202(1)(c), but for which it would have been within the code. RCUK will prepare and submit where authorised: all statutory returns, monthly PAYE and NICs submissions, all regular VAT returns, Annual Accounts and all other documents as required by law and within the Companies Act. Advice: I see no particular risk in PSCs (or agencies) contracting with RCUK or RPSC for accounting services. 6

7 ALL SECTORS Agency Benefits with Single Person Limited Company is a totally guaranteed service designed to meet the requirements of all contractors, HM Revenue & Customs, temporary recruitment agencies and RCUK. Authorisation to act as the agent ensures complete security and transparency for all parties. AWR risks are minimised by the use of single person limited companies, although commercially we would recommend Agencies to continue to monitor and comply with AWR. Unaffected by Managed Service Company (MSC) Legislation. Unaffected by IR35 as we assume all individuals are caught. National Minimum Wage (NMW) and National Living Wage (NLW) requirements are satisfied. No Holiday Pay requirements although we do account for Holiday Pay. Pension Auto-Enrolment requirements don t apply but we recommend people make provision for their retirement. Full PAYE RTI per individual company. Full HM Revenue & Customs reporting facility for agencies. No agency employer/employee relationship issues. VAT savings & cash flow savings where applicable. Agencies remain in control and whilst there is no legal obligation to offer or conform to the above, you have the option to remain commercial e.g. pay an additional 1% for a pension or pay parity pay as you would have under AWR; ultimately, the choice is yours. Advice: I am not aware of any other liabilities being transferable to agencies

8 Risk Free The following list outlines the numerous commercial benefits to agencies who choose (Direction, Supervision or Control). 1. The payroll product is arguably the safest, risk free platform on the market today. 2. A key facet of s registration process is that each and every contractor must complete our unique Best Advice Matrix (BAM) which provides a personal illustration of the most appropriate payroll model for their personal and professional circumstances. 3. ensures complete supply chain compliance with no material breach of any current or proposed Government legislation, including the impending IR35 review. 4. There can be no intentional tax or National Insurance (NIC) losses within the individual DSC Company as the model has been designed to prevent any tax avoidance. Consequently there is no requirement to consider GAAR (General Anti-Avoidance Rule). 5. No risk of contravening MSC legislation as all income after allowable expenses will be paid as employment income. Any legitimate expenses claims will also be subject to annual Corporation Tax submissions, or more specifically, when considering ITEPA S61B(1)(c) will not be fulfilled i.e. no increased receipts over what would otherwise be paid as employment income. Further s61d(1)(c) (receipt of a payment which is not earnings) will not be met, so there should be no deemed employment payment. 6. No IR35 risk as we operate on the basis that is caught by IR35, and as such, only make payment to the individual by way of employment income. 7. Memorandum & Articles of Association dictate that no dividends, bonuses, loans or capital can be paid in any other form than employment income. 8. In the unlikely event that there is any surplus capital upon the dissolution of the company, then payment will be made to charity, (never to any person). 9. No home to work Travel & Subsistence (T&S) tax relief is allowed under the new regulations and our software does not have the facility to process any such claims. 10. There is no risk of non-payment to HM Revenue & Customs, as all monies are invoiced and retained under the contract between RCUK and the DSC. After the required payroll calculations, all tax, NIC and VAT liabilities (where applicable) will be paid in full to the Revenue and on time. 11. The account in which DSC monies will be held is a duly designated client account that is ring-fenced for added security (see Barclays letter on Page 10). 8

9 ASSURANCES & INDEMNITIES WHEN YOU PROMOTE 12. In terms of employment status, under each contractor becomes the sole director, shareholder and employee of their own limited company. No risk of employee/employer legal or tribunal issues for Agencies. 13. The payroll process within each DSC assures full National Minimum Wage (NMW) or National Living Wage (NLW) levels are consistently met so no risk of investigation by HM Revenue & Customs. 14. The payroll process within each DSC assures that Holiday Pay is accounted for and paid at 12.07% (5.6 weeks or 28 days per annum, pro rata). 15. Statutory SMP and SPP are available after standard qualifying periods. 16. All submissions, returns and filing requirements will be undertaken by RCUK when due. 17. Agency Workers Regulations (AWR) risks are minimised with a one person limited company. 18. Similarly, Pension auto-enrolment is not applicable to a one person limited company so no running costs to the agency. 19. Where applicable, VAT registration (including Flat Rate VAT) must be applied for and approved by HM Revenue & Customs. 20. Employers Liability and Public Liability Insurances are mandatory and provided for each DSC Company ensuring considerable cost savings to the agency. 21. Professional Indemnity Insurance will also be provided to certain industry sectors. Other insurances can also be sought. 22. The contractor will be fully supported with the running of their company, seamlessly taking place in the background. From a contractor s perspective, there will be minimal administration or hassle. 23. Where the company isn t VAT registered the agency receives an instant 20% increase in cash-flow compared to the traditional umbrella model. 24. No need to employ an internal payroll team as fulfills the following requirements: pension processing, RTI, multiple BACS transactions, payslip production and distribution, IT investment, endless correspondence with HM Revenue & Customs and other infrastructure costs. GO TO WORK, GET TIMESHEET SIGNED & GET PAID - THAT S IT!

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11 AGREEMENT REGARDING CLIENT ACCOUNT ACCOUNT NUMBER 8313**** The RACS Collective (UK) Limited Client Account has been set up on the following basis: 1. Agencies will pay all fees related to the product into the Client Account (8313****) pursuant to the Scheduled Invoicing agreements. 2. The RACS Collective (UK) fee plus the VAT element will be transferred to the RACS Collective (UK) current account (3316****). 3. The fee for insurance and administration will be transferred to the RACS Collective (UK) current account (3316****). 4. Net wage amounts, after deduction of PAYE/ NI and any deduction which is required by law or court order, will be paid to each individual DSC Company Director s nominated bank account via a BACS payment. 5. Any expense expressly related to an individual DSC Company and approved by that DSC Company s Director may be paid from the Client Account. 6. All monies deducted and withheld in relation to PAYE/NI; VAT and any other tax amount (excluding Self-Assessment) or deduction required by law or court order will be held in the Client Account and paid to HM Revenue & Customs or other relevant authority by the required date. 7. Conditional upon receipt of cleared funds all payments of net wage amounts will be made in accordance with the terms of the agreement with the individual DSC Company, except where circumstances beyond our control prevent this. 8. No payments or transfers other than those detailed above will be made from the Client Account. 9. No one other than the signatories to this agreement will be permitted, authorised or allowed to make any payment or transfer from the Client Account. We the undersigned agree to the above conditions and undertake to comply with them. Signed by all parties with access to the RACS Collective (UK) Limited bank accounts (account numbers 8313**** and 3316****): Signature: T W Hillier Managing Director Date: 31st March 2016 Signature: A Goodship Finance Director Date: 31st March 2016 Signature: M Polden Payroll Director Date: 31st March 2016 Signature: R Langan Management Accountant Date: 31st March

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16 Risk Free ADMINISTRATION SERVICES AGREEMENT Parties: RCUK Company RACS Collective (UK) Ltd registered in England under company registration number which has its registered office at RACS Group House, Three Horseshoes Walk, Warminster, Wiltshire, BA12 9BT <<insert company details here>> WHEREAS: A RCUK provides accountancy and support services to companies and individuals. B The Company proposes to carry on business providing the services of an individual worker or workers to end user customers ( Customer or Customers ). C The circumstances of the proposed provision of services by the Company are likely and are intended by the Company to be such as will engage the provisions of the Income Tax (Earnings and Pensions) Act 2003, Part 2, Ch 8 and the Social Security Contributions (Intermediaries) Regulations 2000 (commonly known as IR35). D The Company wishes RCUK to provide accountancy and support services to it. IT IS AGREED: Appointment and scope 1. The Company engages RCUK to provide to it the accountancy and support services more precisely described in Schedule 1 ( the Services ). 2. This agreement shall continue from the date hereof until terminated in accordance with clause 8. RCUK obligations 3. RCUK shall: (a) provide the Services with reasonable skill and care, (b) use its reasonable endeavours to keep the Company adequately informed of the steps it is taking in performing the Services. RCUK power and duties 4. RCUK may sign documents on behalf of the Company as its agent or attorney. The Company will evidence or confirm this where RCUK requires in such further document(s) as RCUK may specify. 5. The constitution of the Company does not permit distribution of funds of the Company otherwise than as employment income in respect of which PAYE income tax and Class 1 National Insurance contributions are deductible and payable (otherwise than on the occasion of a winding up). RCUK has no obligation to advise or effect any financial arrangements inconsistent with this. Should the Company pass any resolution inconsistent with this, or amend its constitution so as to permit any other distribution, RCUK may treat this agreement as immediately terminated by the Company. Company obligations 6. The Company shall: (a) promptly inform RCUK of any proposed engagement by any Customer to which it proposes to supply a worker and shall provide all such further information as may be requested or required by RCUK for the purpose of providing the Services, (b) act at all times in good faith and do nothing which may prejudice the ability of RCUK to perform the Services, or which may bring RCUK into disrepute, (c) inform RCUK immediately if it becomes aware of any investigation or claim by HM Revenue & Customs (or any other relevant authority) and promptly cooperate with RCUK in responding to any investigation and defending any claim as advised by RCUK, (d) pay the Fees promptly, (e) immediately forward to RCUK any forms, letters or paperwork it receives concerning its affairs, (f) keep records of sales invoices, purchase invoices, receipts and payments together with any other documents relating to the Company s transactions and activities and immediately make them available to RCUK on request, 16

17 Risk Free ADMINISTRATION SERVICES AGREEMENT (g) be responsible for (i) the reliability of the Company s books and records, (ii) the honesty of the conduct of the Company s business, (iii) the safekeeping of the assets of the Company s business. (h) promptly inform RCUK of any proposed changes to the Articles of Association as adopted at the date of incorporation, (i) promptly inform RCUK of any proposal to alter the issued share capital from that authorised and issued on incorporation, or any request to register new shareholders, (j) promptly inform RCUK of any proposal to make payments to any director, employee or shareholder of the Company other than by way of salary. Authority and the Services 7. The following shall comprise the authority of RCUK and its stated limits: (a) RCUK may not enter into any arrangement or perform any matter in relation to the Company that is not strictly required for the performance of the Services and the arrangements under this agreement, (b) the Company authorises RCUK where appropriate to inform any Customer of any agreement to which the Conduct of Employment Agencies and Employment Businesses Regulations 2003, reg 32(1) to (8) shall not apply, (c) the Company agrees that RCUK may in its sole discretion notwithstanding any duty of confidentiality, and without formal statutory compulsion: (i) disclose relevant information about the Company to HM Revenue & Customs or to any relevant authority wherever it appears in the opinion of RCUK appropriate to do so; (ii) deal with any such authority as agent for the Company, and sign any forms required by the authority for the purpose, including Form 64-8 or any replacement thereto; (iii) appoint any legal or tax adviser to advise RCUK and the Company (either solely or in conjunction with any other company or companies in materially similar circumstances) on any matter concerning its affairs provided that the appointment shall be an Additional Service to which the provisions in this agreement apply. (d) RCUK may (and the Company authorises it to): (i) request Customers to provide information concerning time worked by the Company for the Customer weekly or at such other frequency as RCUK and the Company and the Customer shall agree, (ii) raise invoices for work done by the Company in the Company name to Customers whether or not the invoice is collated and submitted to the Customer with invoices due for other clients of RCUK so long as the Company invoice and amount (including the correct level of VAT charge) is clearly identified, (iii) request the Customer to make payment in the name of RCUK, as agent for the Company, to the RCUK Client Account, (iv) collect payment for invoices in the name of RCUK as agent for the Company, (v) provide any report required by a Customer to the Customer for its own compliance including pursuant to any reporting requirement under the Income Tax (Earnings and Pensions) Act 2003 ss.44-47, (vi) enter into such agreement in its own name with a Customer in such form and on such commercial terms as it considers appropriate in order to facilitate the arrangements for collection of information about time worked, invoicing and recovery of payment on behalf of the Company referred to in this agreement. (e) RCUK may deduct from the RCUK Client Account: (i) such costs as are reasonably required to be paid in the course of performance of the Services provided that the costs are included in an invoice from RCUK to the Company and RCUK provides an explanation of the costs to the Company, (ii) the Fees for the provision of the Services provided that the fees have been correctly invoiced, (iii) such sums as are due to be paid by it to HM Revenue & Customs or any other relevant authority in the performance of the Services, (f) in respect of monies collected by RCUK it shall keep a record of invoices raised and the monies claimed, and payments received and shall provide such reports as are required under the Services to the Company no later than 7 days after the event requiring the generation of the report, (g) RCUK shall use the monies so received for the benefit of the Company to perform those aspects of the Services wherever payment

18 Risk Free ADMINISTRATION SERVICES AGREEMENT is required (to any person or authority) in the proper performance of the Services, and RCUK shall ensure that: (i) monies due from the Company to HM Revenue & Customs or any relevant authority shall be paid promptly and within any time limit imposed by regulation for payment, (ii) monies due to the Company after calculation by RCUK shall be paid promptly to the party so entitled in accordance with any payment time scale agreed with the Company as the case may be, (h) monies retained in the RCUK Client Account and not used for any period of time for the Services shall be held in trust by RCUK for the benefit of the Company and shall not be used for any purpose other than the purposes of the Company. RCUK shall be entitled to retain for its own benefit any interest accrued on such monies, (i) RCUK may subcontract or outsource part or all of the Services, (j) in the event of any dispute or complaint raised by a Customer or other party to whom services are provided by the Company RCUK may take such steps as it considers reasonable to investigate the dispute on behalf of the Company including (in its discretion) attending any investigatory meetings of any kind, (k) in attending any such investigatory meeting RCUK shall be the representative of the Company. Termination 8. The following shall apply in respect of termination: (a) either Party may terminate this agreement upon giving to the other four weeks written notice to that effect, (b) this agreement shall terminate automatically and without requirement for notice: (i) upon the liquidation of, winding up, passing of resolution to wind up, entering into an arrangement with creditors, of RCUK or the Company or (ii) should the Company cease to provide services for any Customer for a period of 3 consecutive months, (c) upon termination howsoever caused RCUK shall as soon as practicable prepare and deliver to the Company a final account setting out all monies held by RCUK in the RCUK Client Account in connection with or on behalf of the Company and all monies due to be paid, whether to RCUK or to HM Revenue & Customs or any relevant authority or any creditor, and shall promptly make payment to the Company within 7 days thereafter of the net sum due to the Company after deduction of sums due to others (including RCUK), (d) for the avoidance of doubt RCUK may retain in the RCUK Client Account following termination such sums as are properly due (or will fall due) to RCUK or to other creditors and which would be paid under the terms of this agreement were it not for its earlier termination, and for these purposes the respective rights and obligations of the Parties hereunder shall continue in full force and effect until such time as all payments due have been concluded. Liability 9. RCUK shall not be responsible to the Company or liable for: (a) failure to deal with any tax enquiry or investigation into the Company s affairs where this is due to the failure of the Company to obtain and provide full and proper information to RCUK or any necessary authorisation (b) any increased tax or penalty arising from the failure of the Company to provide full and proper information to RCUK or from the Company s entering into any transactions without the knowledge of RCUK (c) any matter or errors arising from the delay in or failure of the Company to obtain and provide accurate information and documentation required by RCUK or any third party (d) detecting or failing to detect any fraud that may occur in the Company s business. 10. RCUK is not a legal adviser and does not provide the Company with legal advice. 11. RCUK s liability in any event, save where liability cannot be limited by law, shall be limited to direct losses arising from its own negligence only and shall not exceed the lesser of (a) the amount of its fees for the last month of its Services under this agreement (b) 100,000 (c) the Insurance Limit 18

19 Risk Free ADMINISTRATION SERVICES AGREEMENT 12. The Company, which is not acting as a consumer, acknowledges that the limits of liability in clause 11 are reasonable. The Company agrees to indemnify and keep indemnified RCUK and its servants and directors against any claim by HM Revenue & Customs or any other relevant authority against RCUK pursuant to any legal entitlement (including without limitation under the Income Tax (Pay as You Earn) Regulations 2003 and the Social Security (Transfer of Functions, etc) Act 1999) that results or may result in liability for payment of tax or National Insurance contributions attaching to RCUK, the indemnity to extend to any penalties, interests and the reasonable costs of defending such a claim. Administration tools 13. RCUK may at its discretion make available certain tools and facilities, including via online portal access at the Website, to assist the Company in its record-keeping and provision of information to RCUK and to third parties. 14. The Company shall ensure that any tools and facilities referred to are used solely for legitimate business purposes authorised by RCUK, and in accordance with any rules, policies and procedures required by RCUK from time to time. General 15. The following general provisions shall apply: (a) RCUK shall not be obliged to make any payment to any person under this agreement unless it shall first have received payment in respect of the invoice raised by RCUK to a Customer to which the relevant payment relates, and in particular shall not be liable to make any payment that exceeds sums held by RCUK on behalf of the Company in the RCUK Client Account, (b) the Fee may be invoiced by RCUK on a weekly, fortnightly or monthly basis as RCUK considers appropriate during periods when the Company is providing services to its Customer, payment of the Fee being due within the earlier of 7 days of receipt of payment from the Customer or 21 days from the date of the RCUK invoice (whether or not a Customer has made payment), (c) RCUK may make arrangements for compilation and provision of information relating to the Company and other clients of RCUK within one document, (d) this agreement is limited to the appointment of RCUK in connection with the Services; RCUK is not the agent of or trustee for the Company for any other purpose, (e) this is the sole and entire agreement between the Parties and may not be varied save by agreement of all Parties and confirmed in writing by RCUK and signed by an authorised officer of RCUK, (f) references to any enactment shall unless context otherwise requires, be construed as references to that enactment as amended by or under any other enactment, (g) this Agreement is governed by the law of England and Wales and shall be subject to the sole jurisdiction of the courts of England and Wales, (h) consent of the Company shall be deemed wherever RCUK for the purposes of the efficient provision of the Services makes a lawful recommendation to the Company, which may be related to any aspect including for the avoidance of doubt related to invoices, a company matter (including accounts returns) or a tax matter (including tax returns), and gives notice to the Company that the recommendation is deemed accepted unless the Company informs RCUK otherwise within a stated time limit set out in the notice, being not less than 7 days after the recommendation containing the notice. Definitions 16. The following definitions apply to this agreement: Customer A person for whom the Company provides work services, being an Employment Business or other customer of the Company. Employment Business Fees Insurance Limit RCUK Client Account A business that is in the business of supplying persons to provide work services to a third party. The fees of RCUK as set out in Schedule 2 plus VAT or such alternative or additional fees agreed between RCUK and the Client or the Company as the case may be depending upon whether the fees relate to work for the Client or work for the Company. <<insert level of RCUK s PI insurance>>. A bank account set up by RCUK in its own name and designated as its Client Account for the purpose of receiving monies invoiced to Customers by the Company and other clients of RCUK

20 Risk Free ADMINISTRATION SERVICES AGREEMENT Services Website The services set out in Schedule 1 and any additional services ( Additional Services ) agreed from time to time by RCUK with the Client or the Company. The website of RCUK at url Dated this <<??>> day of <<month>> 2016 Terry Hillier Signed on behalf of the Company by its director Signed on behalf of RACS Collective (UK) Ltd by its director SCHEDULE 1 PART 1 General Services To act for the Company in its dealings with Customers and Relevant Authorities. Enter into such arrangements as RCUK considers appropriate to facilitate the requirements of this agreement including with any Customer with which the Company wishes to deal provided that RCUK shall not be obliged to enter into any arrangement under which a Customer has not agreed a process for invoicing in RCUK normal form. To ensure in any such agreement with a Customer that the arrangements allow for: the provision by the Customer to RCUK of timesheets relevant to work undertaken by the Company, agreement by the Customer that RCUK acts as agent for the Company and it will promptly pay RCUK on invoices raised by RCUK in respect of charges due to the Company. PART 2 Administration, accountancy, payroll, tax and invoicing services The registration of the Company with HM Revenue & Customs for PAYE and VAT and such other purposes as may be required by any statutory authority from time to time. Where the Company has been accepted under the Flat Rate VAT Scheme, this scheme will be used for such period as it is available or until the Company issues alternative instructions. Accountancy services and related advice including: Calculation of o PAYE Tax o National Insurance o VAT o Corporation Tax o Dividend o Student loan deductions Preparation of o Company Year-End Accounts o Abbreviated Company Accounts where appropriate o Director s personal tax return (where this return involves monies received outside of the PAYE system RCUK reserves the right to submit an additional invoice for this service to the director) o VAT returns 20

21 Risk Free ADMINISTRATION SERVICES AGREEMENT Payroll administration including o Calculation of net sums due to workers for work performed for the Company for which an invoice has been raised in accordance with this agreement, exclusively on the basis that all engagements of workers and of the Company fall within the Income Tax (Earnings and Pensions) Act 2003 Part 2 Chapter 8 and the Social Security Contributions (Intermediaries) Regulations 2000 (commonly known as IR35). Bookkeeping and related advice including: Keeping the records of receipts and payments Reconciling monthly the balances on bank statements Keeping the purchase and sales ledgers and the nominal ledgers posted and balanced regularly Preparing a detailed list of ledger balances regularly Services as a Tax Agent The Services acting as tax agent may include the following: Preparation and submission of tax returns for the Company Issuing of all necessary reports to the Company Dealing with HM Revenue & Customs Dealing with Companies House Electronic filing of Real-Time Information returns under the Income Tax (PAYE) Regulations 2003 and Social Security (Contributions) Regulations 2001 Completion of forms P11D Services as invoicing agent Receiving time records of time worked by the Company in accordance with an agreement with Customer Raising invoices for work done by the Company Recovering payment on invoices raised Accounting for monies received and paid out PART 3 Insurance Services To act in an intermediary capacity on behalf of the Company for the purposes of obtaining Employers Liability, Public Liability and, where appropriate, Professional Indemnity insurance by effecting introductions to an appropriate insurance broker and negotiating terms with them. SCHEDULE 2 Fees Fee Minimum Fee Setup Fee Additional Fee An amount equivalent to 4% of the total sum excluding VAT, but not exceeding 30 for any week, invoiced by RCUK to a Customer on behalf of the Company for its services. YY within each period of 12 months from the Commencement Date ( Fee Year ), the Minimum Fee only being due if the Annual Fee in any Fee Year does not exceed YY plus VAT. A sum equivalent to any costs incurred by RCUK in relation to the formation or setting up or maintenance of the Company prior to or within the first year of this agreement, including, but without limitation, payment made to formation agents and Companies House. RCUK shall reimburse the Setup Fee provided that other Fees due under this agreement for the first year are paid by the end of the first year of this agreement. Such sums as may be agreed from time to time for Additional Services

22 Risk Free ADMINISTRATION SERVICES AGREEMENT SCHEDULE 3 Draft form of adoption instruction and resolution At a meeting of <<XYZ Ltd>> held on the <<??>> day of <<?????????>> 2016 It was resolved that 1. The Company instructs RACS Collective (UK) Ltd to act as its agent on the basis of the agreement dated the <<??>> day of <<????????>> 2016 made between RCUK and <<insert name of company>> ( the Agreement ). 2. The Company hereby adopts the Agreement and commits to its requirements and obligations. 3. The provision of a copy of this resolution to RCUK shall constitute evidence of the Company s acknowledgement and acceptance of the Agreement as if the Company existed at the date of the Agreement and was signatory thereto. Signed Director 22

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32 Compliance COMPLIANCE & PROFESSIONAL CREDENTIALS Since formation in 2007, RACS Group has embraced and adhered to all aspects of tax and employment legislation, in addition to embracing all facets of commercial best practice. This ethos underpins the brand as a whole and is manifest in our company strapline, Compliance Without Compromise. As the payroll and temporary recruitment sectors continue to evolve in light of even more regulations, RACS Group s company position remains firmly committed to preserving the commercial wellbeing of both agencies and contractors. To add substance to this philosophy, RACS Group has consistently adopted a transparent approach by which all our payroll models are vetted and scrutinized by a myriad of legal industry experts, trade associations and audit bodies. This document outlines the respective compliance credentials of (Direction, Supervision or Control) and RACS Collective (Umbrella Without Expenses) as of April Risk Free (Direction, Supervision or Control) A risk-free employed income model specifically designed to meet the requirements of Travel & Subsistence (T&S) legislation introduced in April Widely regarded as a genuine alternative to the traditional umbrella model, has been developed over a twelve month period in accordance with all legislative updates and guidelines. We appreciate that some of your clients might be concerned about the introduction of a new payroll model, but you can reassure them that the relationships will remain exactly the same throughout the recruitment supply chain. Even in April 2017 when all PSCs working in the public sector need to access their tax status, will do this for you and deduct tax and NICs as both the closest source to the PSC and as their agent. RACS Group has actively provided full disclosure throughout the development of and sought the advice of the following industry experts: ADVICE SOUGHT David Heaton Industry-leading Tax Consultant Previously a Tax Partner at Baker Tilly Lawspeed Contracts and structure advice from Adrian Marlowe Specific guidance for the education sector Osborne Clarke Law Firm of the Year 2015 (Legal Business Awards) Recruitment industry specialists Professional Passport Acknowledged compliance standard for recruiters and intermediaries Crawford Temple established industry commentator Fully embrace Member s Code of Conduct Leading Tax Counsel Product structure Expenses allowable FULL DISCLOSURE EY (Ernst Young) Globally-renowned financial strategists John Chaplin recruitment and payroll expertise FCSA (Freelance & Contractor Services Association) Associate member since March 2016 Full submission of all payroll models as per membership criteria HM Revenue & Customs Full disclosure of model to VAT Registration Unit Successful application for Flat Rate (FRS) in March 2016 Leading Tax Counsel No IR35 risk No contravention of MSC legislation PRISM Active and founding member of intermediaries trade association Fully embrace Member s Code of Conduct 32

33 Recruitment Agency Endorsement has been endorsed by numerous leading recruitment agencies including international and national multi-site brands, plus many independent entities. The procedures and processes used by have been exhaustively vetted by many of these agencies own compliance and legal teams prior to being adopted as their payroll model of choice post April Contractor Endorsement Thousands of contracting professionals have registered with since the product was launched in March These contractors operate in a variety of sectors including education, medical, construction, finance, logistics and driving which highlights the model s compatibility with all industries. Umbrella RACS Collective (Umbrella - No T&S Expenses) RACS Group s umbrella model is one of the most popular payroll products available and is the preferred model for hundreds of recruitment agencies and tens of thousands of contractors. Despite the withdrawal of tax relief on home-to-work (and work-to-home) travel and subsistence expenses claims in April 2016, our umbrella solution will remain the favoured umbrella model for both agencies and contractors. In addition to many of the experts and organisations already listed, RACS Collective has also been widely audited or accredited by numerous trade organisations including: APSCo (The Association of Professional Staffing Companies) In accord with APSCo s commitment to compliance, excellence and best practice Registered affiliate member since 2012 ARC (The Association of Recruitment Consultancies) Share ARC s commitment to fairness and equality in the recruitment industry An approved supplier to ARC members, many of whom are clients IPSE (The Association of Independent Professionals and the Self Employed) Fully support the aspirations of this national contractor network Successfully passed IPSE s stringent affiliate membership vetting process Lawspeed SPA (Service Provider Audit) The SPA scheme assists recruiters with all aspects of legislation and best practice An approved service provider meeting the organisation s exacting criteria TEAM (The Employment Agents Movement) An approved service provider to both TEAM and their client base Membership consistent with RACS Group s existing credentials and audit standards Agency Care Department For more information regarding RACS Group s compliance or professional credentials, please do not hesitate to contact our Agency Care department agencycare@racsgroup.com APPROVED SUPPLIER TO THE ASSOCIATION OF RECRUITMENT CONSULTANCIES

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36 Also available... Risk Free SPRING 2016 SIMPLE SIGN-UP THE RISK FREE EMPLOYED INCOME MODEL STEP 1 REFERRAL Sign up with your Agency. Agency refers your details to RACS Group. STEP 2 CONSULTATION Illustration and advice sent to contractor. selected as the best payroll solution. STEP 3 REGISTRATION & INCORPORATION Identity and right to work verification completed. Limited company is created. Welcome sent with certificate of incorporation, portal log-in details and insurance schedule. CALL NOW For an instant comparison of your take-home pay registrations@racsgroup.com RACS Umbrella (No T&S Expenses) RACS PAYE RACS PSC Risk Free IMPORTANT INFORMATION A NEW PAYROLL MODEL TO KEEP YOU COMPLIANT S971/Rev7 Fully compliant product unaffected by: New Travel & Subsistence Legislation Agency Workers Regulations (AWR) Pensions & Auto-enrolment Managed Service Company (MSC) Rules & IR35 Legislation No Employer Liability No National Minimum Wage or Living Wage Issues No Holiday Pay to Worry About Easier Than Current Umbrella Model All information correct at the time of publication - February 24th 2016 STEP 4 ACTIVATION Your registered office will be located at the head office of Ltd Formations Limited who specialise in the creation and management of contractor companies. We will register you with HM Revenue & Customs (including your UTR number). Once we receive the relevant details, we will activate your online contractor portal, on your behalf, where you can now access payslips, company documentation and any messages from RACS Group. STEP 5 GETTING PAID Signed timesheet submitted to agency. Agency sends pay information to RACS Group. Text sent confirming your take-home pay on Thursday. Net pay paid into your bank by 9am on Friday. LIVE CHAT available LIVE at CHAT us info@racsgroup.com Call am pm CONTACT US NOW Head Office RACS Group House, Three Horseshoes Walk, Warminster, Wiltshire. BA12 9BT racsgroup.com info@racsgroup.com S1109/Rev4 PLEASE READ THIS LEAFLET CAREFULLY New Product Brochure RACS GROUP Information for Agencies Brochure Contractor Leaflet TO FIND OUT MORE For more information or to arrange a meeting with our Business Development team, please contact our Agency Care department: agencycare@racsgroup.com RACS Group House Three Horseshoes Walk Warminster Wiltshire BA12 9BT info@racsgroup.com racsgroup.com S1123(v3)