Updated template contracts
Last minute technical changes to the off-payroll (private sector) legislation – updates to REC contracts and supporting documents.
Updated on 26 March 2021
The off-payroll rules will apply to the private sector from 6 April 2021. Since the 2021 Finance Bill government introduced some technical changes to the off-payroll rules for workers who provide services through intermediaries where the clients are public authorities or medium or large in the private sector. The changes ensure that the off-payoll rules operate as intended.
Here's a summary of the changes
Government has confirmed that there will be changes to the rules:
- the wider definition of an intermediary will be corrected so that umbrella company workers are not within the scope of the rules.
- currently the rules apply to contractors, who must have a material interest in the intermediary they work through. Material interest means owning more than 5% of the company; or being entitled to 60% or more of the profits in a partnership. But material interest will change only for companies to include cases where the contractor has less than a material interest meaning the rules will apply if they receive payment that is not deemed employment income and they have any interest in the company.
- a targeted, anti-avoidance rule will be applied to arrangements where the primary purpose is to gain a tax advantage by circumventing the rules.
- to make sharing information easier, instead of just the worker, the intermediaries will be obliged to confirm to persons in the supply chain whether the IR35 qualifying conditions are met (in terms of what the worker has been paid).
- extend the consequences for providing fraudulent information, so where fraudulent information is provided, the liability will be moved to the party in the UK supply chain that provided the fraudulent information.
As a result of these last-minute changes we have made some amendments to our template contracts and some of our supporting documents.
We advise members to use these versions of the contracts and template documents going forward and here is an explanation of the amendments we have made:
|Contract Number||Off-payroll rules apply or don't apply||Amendment|
|REC Combined Terms|
|Contracts 3A, 3C, 4A, 4B, and 4C||Off-payroll rules apply||Definition of Conditions of Liability to include non-material interest and termination clauses.|
Contract 3B, 3D,
|Off-payroll rules do not apply, as the clients are exempt||Minor amendment to the introductory notes in the contract (not the contract), to simply highlight minor changes to the off-payroll rules from 6th April 2021.|
Contracts 5, 6, 7
Private sector - Off-payroll rules do not apply
Public sector - Off-payroll rules apply
|As these contracts are used for umbrella company arrangements, amendments have been made to definition of Conditions of Liability to include non-material Interest and termination clauses,to reflect rules in the public sector.|
|Contracts 5A, 6A, 7A, 8A, 9A, 10A, 11A and 12A||Public sector - Off-payroll rules apply||Amendments have been made to definition of Conditions of Liability to include non-material Interest and termination clauses, to reflect rules in the public sector.|
Please do not use contracts 9, 10, 11 & 12 after 6 April 2021 if the off-payroll rules apply. You can use combined terms 3C with the client and 4C with the contractor.
If you require further guidance please contact the legal helpline.
On this page you will find links to our new contracts and related documents.
We encourage members to move to these new contracts as soon as suits their business. However, you can still find our previous suite of templates on the website - we haven't removed anything.
As well as producing new templates, which are available below, we have taken the opportunity review all of our documents with the aim of reducing the number of template contracts you need to think about when working with clients and work-seekers.
For further support, including the latest updates about the off-payroll changes, see the IR35 hub, which includes new guides which you can use with your clients and contractors. To help you get ready, attend one of our virtual IR35 seminars
What changes have we made?
- We’ve merged some of the contracts, specifically those labelled “opted out of the Conduct Regulations” and “non-opted out”, and both “inside” and “outside IR35” (client terms only). Effectively this replaces 16 template contracts with just 6.
- We’ve created new “combined” contracts for members to use when supplying a combination of PAYE temps, temps working through an umbrella company or temps working through their own personal services company. There are two versions – one each when the client is exempt from the off-payroll rules and one when the client is not exempt. Or, if you only supply PSCs, we have contracts for those too. See the IR35 hub for more information about exemptions from the off-payroll rules.
- We’ve made it clearer which contracts to use with umbrellas and which to use with PSCs.
- We’ve simplified text within the contracts where possible.
- We’ve updated a number of related documents such as assignment details forms, Conduct Regulations opt out forms, exempt company declaration form, client status determination and due diligence checklists.
For further details about the changes we've made to the template contracts, download this guide
Send us any feedback you have on the new contracts at firstname.lastname@example.org
Contract 3C - Terms with a client which must comply with the off-payroll rules (outside IR35) for the supply of PSCs only
Contract 4B - Terms with a PSC (inside IR35 and client must comply with the off-payroll rules)
Contract 4C - Terms with a PSC (outside IR35 and client must comply with the off-payroll rules)
New supporting documents and forms
*New* Document A2 - Assignment Details Form (PSCs not opted out of the Conduct Regulations)
A note on statements of work
We haven’t produced a statement of work contract. We know that there is interest in this as the IR35 changes approach. However, statement of work contracts will be bespoke to the projects undertaken. Delivering, say, an IT project, is very different to supplying IT contractors. Also, when an agency is delivering a project, HMRC will assume it is a labour supply and not a genuine statement of work scenario – the agency will have to demonstrate otherwise. So unfortunately we can’t produce a template statement of work contract which would meet the needs of bespoke arrangements and not be challenged by HMRC. If you do want to go down this route, our legal business partners can help you with contracts.