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Recrutiment & Employment Confederation

Information for REC members

Technical changes to the off-payroll (private sector) legislation – updates to REC contracts and supporting documents.

 On 6 April 2021, the off-payroll rules were applied in the private sector. 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.

 Download the contracts now 

 Download the supporting documents here 

Here's a summary of the changes 

  • the wider definition of an intermediary has been corrected so that umbrella company workers are not within the scope of the rules.
  • Before 06 April 2021, the rules only applied 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 has changed for companies to include cases where the contractor has less than a material interest, (non- 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 has been 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, intermediaries are 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).
  • the consequences for providing fraudulent information has been extended, so where fraudulent information is provided,  liability is moved to the party in the UK supply chain who provide the fraudulent information.​​​​

HMRC has updated its guidance on how to use the Check Employment Status for Tax (CEST) tool to reflect these changes. 

HMRC has rewritten its CEST tool guidance following the changes to the off-payroll working rules which came into force in April 2021.

The CEST tool can be used to help hirers, agencies and workers decide on the employment status of an individual and, where appropriate, to decide whether the off-payroll rules apply to a contract.

The guidance notes that HMRC will stand by all status determinations given by the tool so long as the information provided was accurate.


REC Model Contracts and Combined Terms

Client Contracts Temporary Worker Contracts
Contract 3 PAYE Agency Workers Umbrella Workers PSC Inside IR35 PSC Outside IR35
Client who are not exempt from the off-payroll rules  

Contract 3A

Combined terms for the supply of PAYE workers, umbrella company workers and PSCs - covers inside and outside IR35 and non-opted out and opted out contractors

Contract 4 (PAYE ONLY)

Contract 4A

(combined non-opted out and opted out)

Contract 4B

(Combined non-opted out and opted out)

Contract 4C

(opted out only)

Contract 3C

For the supply of PSCs only

- outside IR35 opted out contractors


Contract 4C

(opted out only)

Contract 3E

For the supply of PSCs only

- cover outside IR35 and non-opted out contractors


Contract 4E

(non-opted out only)

Clients who are exempt from the off-payroll rules  

Contract 3B

Combined terms for the supply of PAYE workers, umbrella company workers and PSCs - covers outside IR35 and non-opted out and opted out contractors
Contract 4

Contract 4A

(combined non-opted out and opted out)


Contract 4D

(opted out only)

Contract 3D

For the supply of PSCs only - outside IR35 and opted out

Contract 4D

(opted out only)

Contract 4D

(opted out only)

Contract 3F

For the supply of PSCs only - outside IR35 and non-opted out

Contract 4F

(non-opted out only)

Contract 4F

(non-opted out only)


REC Model Contracts and Non-Combined Terms

Client Contracts Temporary Workers Contracts
  PAYE Agency Workers Umbrella Workers PSC Inside IR35 PSC Outside IR35
Contract 5  

Contract 6

(Opted out of the Conduct Regulations)

Contract 7  

Contract 8

(Not opted out of the Conduct Regulations)

Public Sector Only
Contract 5A    

Contract 6A

(Opted out of the Conduct Regulations)

Contract 7A    

Contract 8A

(Not opted out of the Conduct Regulations)


Contract 9A


Contract 10A

(Opted out of the Conduct Regulations)

Contract 11A      

Contract 12A

(Not opted out of the Conduct Regulations for the Limited Company)


 IR35 changes - Seminar

If you missed our webinar series on IR35, you can now purchase a recorded seminar explaining the measures your business needs to take to comply with the new rules.

This seminar is delivered by Bernie Payne of Labolution. Bernie has worked in legal & compliance roles within the staffing industry for over 15 years and has supported agencies and end clients with their IR35 obligations for both the public and the private sector changes. Bernie has been working closely with the REC since she decided to become an independent consultant in early 2019. 

Please note that the recording was made prior to 6 April and the information provided was accurate on the date of seminar delivery. To purchase the seminar recording, contact us on 0207 009 2100 or email.

The session explores in depth: 

  • What clients the rules apply to
  • Status Determination Statements (SDS) - what they are and what's reasonable care
  • Who is the fee-payer and what are their responsibilities?
  • Disagreeing with the client's decision and how to manage this
  • Knowing your liabilities
  • Commercial and practical considerations for agencies
  • Key client-focused activities
  • System and process changes
  • Changes to contracts and T&C's
  • Supporting clients with IR35 assessments

IR35 advice from HMRC and REC

Missed our recent IR35 webinar with HMRC? You can now download the slides containing answers to the following:

  • Which rules will need to be considered
  • How the rules intend to operate for different parties in the chain
  • How clients will need to consider a worker’s status
Download the slides now

HMRC activity

HMRC updated their Employment Status Manual (in particular look at chapter 8000, 10000 and 11000). This is guidance only but it is useful to understand HMRC’s interpretation of the law. 

There has been some public discussion about how a late change to the off-payroll rules (now in the Finance Act 2020) would affect the use of umbrella companies i.e. that the change might require agencies to deduct PAYE tax and national insurance even where there is an umbrella in the supply chain. REC spoke with HMRC on 14 October and HMRC have released this statement to reassure agencies and umbrellas that where the umbrella company deducts PAYE tax and national insurance, the agency does not have to consider the off-payroll rules.

How can we help you with IR35?

REC members have access to a range of legal resources and business support to help you with the tax legislation that came into effect from April 2021.

Legal resources including model contracts, legal guides, factsheets, guides and REC's legal helpline to advise your clients and contractors.

Up-to-the-minute updates from the government and REC's experts to keep you informed of the latest developments affecting your business.

Business support from IR35 experts in the form of virtual seminars, interactive webinars, blogs, podcasts and more.

Extended IR35 support from REC's accredited business partners who specialise in this field.

Our legal resources and legal support are for members only - Join today to access these

If you wish to gain access to our

  • latest template contracts
  • factsheets
  • legal guides
  • legal helpline or
  • member-exclusive discounts from REC's IR35 partners, then become an REC Corporate member today. 

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"So important to be on top of the new rules. I can highly recommend this [IR35 virtual] event which I attended recently. I now have all the REC new contracts in place and being used. Thank you to the Recruitment & Employment Confederation you can always be relied upon for the best advice and support."

blank profile picture Michelle Cryer
Founder and managing Director, MIDASExec
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"Thanks for a great IR35 session. I have to say it was the best IR35 session I have attended, and believe me I must have been at 15 or more. Your presenter Bernie Payne was great, clear and pragmatic."

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Director, E-Resourcing Ltd

IR35 blogs

How is IR35 working?

It's been almost four years since IR35 rules were introduced in the public sector, and almost a year since they extended to the private and voluntary sectors but the impact of the changes are still being felt. IR35 queries continue to come up on a weekly basis on the REC legal helpline and our members still reflect on some of the unintended consequences associated with the changes  - the rise of umbrella companies, for example.  


 Read the blog 



Year in review - IR35 update

It has been almost 1 year since IR35 rules were extended to the private sector and the responsibility for assessing IR35 status moved from the personal service company to the client. Here, we’ll look back at the changes that have taken place, and outline what to look out for this year (2022). 

Year in review - IR35 update

What changed?

In 2017, public authorities became responsible for deciding if the off-payroll working rules applied for a worker providing services through their own intermediary. Then in April this year, that responsibility was extended to include medium and large sized end-user clients in the private sector. If a client is not exempt, it must provide a status determination statement to both the worker and the party it has a contract with. That statement must confirm whether the engagement is ‘inside IR35’ or ‘outside IR35’. If it is an ‘inside IR35’ engagement, the fee-payer (who has the contract with the Personal Service Company (PSC)) must deduct tax and national insurance before paying the PSC. They are held liable by HMRC to make sure the correct tax is collected.  

Earlier this year, a number of technical changes were introduced, from bringing umbrella companies out of scope to strengthening anti-avoidance measures in the supply chain. Despite best intentions, we are not sure how effective some of these changes have been. Technical changes include:

  • Correcting the wider definition of an intermediary so that umbrella company workers are not within the scope of the rules. This means the umbrella company should treat the workers as employees and deduct tax and NICs from their pay in the usual way.
  • Rules regarding contractors having a non-material interest in the intermediary they work through. This means that the contractor cannot have any shares in the company or receive payment that is not employment income.
  • A targeted, anti-avoidance rule applied to arrangements where the primary purpose is to gain a tax advantage by circumventing the rules.
  • To make sharing information easier, intermediaries will be obliged to confirm to other parties in the supply chain whether the IR35 qualifying conditions are met; and
  • Where fraudulent information is provided, the liability will be moved to the party in the supply chain that provided the fraudulent information.

REC in 2021

As well as continuing to be an active member of the IR35 forum, ensuring our members concerns are heard and addressed on a regular basis, we took the opportunity to send a written submission to the Finance Bill Sub-Committee which was looking into the implementation of the off-payroll rules in the private sector. In our submission, we highlighted a number of concerns, including challenges with HMRC’s CEST tool, which despite some minor improvements, remains incredibly unreliable.

HMRC’s view that mutuality of obligation should not form part of the questions in the CEST tool on the basis that the parties in all assignments have agreed to the contract, does not reflect the reality of the contracting environment. Further, because off-payroll working legislation is complex, it is inevitable that mistakes will be made. The potential inaccuracy of the CEST tool, combined with the subjective nature of the questions in most contexts, results in disagreements between hirers and contractors who must then resort to debating the nuances of what has been established in case law. The Department for Work and Pensions (DWP) owing HMRC nearly £87m for “historic errors” in assessing tax liability for DWP off-payroll workers over the period 2017-21 is a clear example of the flaws with the CEST tool. We have and will continue to advocate for an adequate CEST tool. In our submission, we also raised concerns about the status determination and the unfair predicament that agencies face, potential costs and difficulty recouping any overpayments. For example, the current rules make agencies liable for a status determination that they did not make and where there is an incorrect determination of an “inside IR35” status, that would also mean that additional costs have been wrongly applied to their charge rate - employer’s NICs at 13.8%, VAT which may or may not be recoverable, or the agency may find that its payroll wrongly reaches the £3 million threshold at which point the apprenticeship levy applies. Recovering overpayments from HMRC remains challenging because the legislation does not allow for an offset of tax where there has been an overpayment. Agencies have little or no influence on the tax status decision or employment status of the off-payroll worker but carry a disproportionate compliance burden and liability.   

Whilst we will continue to ensure our members’ concerns are heard, the off-payroll rules are not going away, and although we have made the best of it, without fundamental understanding of the entire supply chain, unintended consequences are inevitable. For example, the introduction and extension of IR35 has resulted in the growth of non-compliant umbrella companies, using disguised remuneration schemes and other tax mitigation models such as joint employment models where umbrellas companies reduce their VAT bill.

Looking ahead to 2022

The government published a call for evidence,  which ran until 22 February, and involved how the umbrella company market operates.  The REC drafted an initial response which is on our website and we hope you will find it a useful guide in developing your own responses. Any feedback members wish to share would be very welcome – you can email us on to feed in. We will be hosting a member roundtable on the issue with BEIS in January – contact us if you would like to take part.

We have four main asks around the regulation of Umbrella Companies. The REC is not advocating for a ban of umbrella companies as this could well lead to the reinvention of umbrella companies or the creation of alternative entities, meaning HMRC and the REC would have to navigate the unknown and potentially non-compliant again. However, we are advocating for:

  1. The introduction of reciprocal employment business/umbrella company obligations to enable more clarity for the worker.
  2. Umbrellas should be subject to similar obligations that employment businesses have under the current recruitment industry legislation.
  3. Regulation should create transparency around fees/payments taken by umbrellas companies; and
  4. Regulation should remove the right for umbrella companies to opt out of the Conduct Regulations.

Another important piece of legislation to look out for in 2022 is the long-anticipated Employment Bill. In December 2019, an Employment Bill was announced in the Queen’s Speech, but it has yet to be published and was notably absent from the Queen’s Speech this year. The government has since indicated that the Bill will be forthcoming “when parliamentary time allows”. It is anticipated that the Bill will be published at some point in 2022. The REC will, of course, keep members up to date with any developments around IR35, umbrella company regulation, and any other upcoming legislation.

Featured blog: Five Reasons Not to Be Tempted by IR35 Blanket Assessments

Some businesses are being tempted by the idea of making ‘blanket assessments’. They are deciding to put all their contractors into one category, either outside or inside IR35, and if inside IR35 this means that the contractors will be treated like employees for tax purposes. That’s regardless of the role the contractor is actually doing. Badging all contractors the same might seem like a quick fix, but in reality, it only stores up bigger problems for the future.

Making blanket assessments is a big mistake for client businesses and we think it’s bad for contractors too. Here’s are five reasons why.

 Read the blog 

Meet REC's approved IR35 suppliers

REC's business partners have been selected for their ability to provide relevant, quality services to our members. Here is a list of specialists suppliers who can support with your IR35 needs. 

Specialist legal support when you need it the most

If you're not an REC member, talk to us today about joining our network and start accessing all the help available to prepare for April 2021.