Should you opt-out of the Conduct of Employment Agencies Regulations?

When asked by my recruiter whether I wanted to opt-out of the "Conduct of Employment Agencies and Employment Businesses Regulations 2003" I didn't know what to do. Hopefully this article will help you to make your decision.

What are these regulations?

They are a set of rules covering how recruitment agencies are allowed to work. Your recruiter may ask you if you want to "opt-out" which means that they wouldn't have to stick to the rules when working with you.

Some useful examples of the regulations include:

Why would you want to opt-out?

If opting out would mean that you require a signed timesheet in order to get paid, and can't go direct to your client as easily, why would you want to opt out? Well a help sheet sent to me by my recruiter said:

"Limited company contractors typically choose to opt out because they wish to demonstrate that they are genuinely self-employed."

Recruitment and Employment Confederation: A guide to opting out of the Conduct Regulations

My recruiter also added that "most freelancers choose to opt out because of IR35". These comments suggest that remaining opted in would imply that you were not genuinely self-employed and could therefore be caught by IR35 tax legislation and have to pay more taxes. (Read my "What on Earth is IR35?" article if that question just crossed your mind!)

"Not opting-out implies that you are not genuinely self-employed": fact or fiction?

This is the most important point to investigate and argue. If it is a fact then it would make sense to opt out as you would pay less taxes. If it is fiction then it would make sense to remain opted in to get the benefits of the regulations.

Who What they say Their verdict
Recruitment and Employment Confederation help sheet "An individual's self-employment status is determined by whether they are inside or outside of the IR35 tax legislation, opting out of the Conduct Regulations will therefore have little impact on whether an individual is genuinely self-employed under IR35." Fiction, opt-in
HMRC - IR35 Unit (in response to my email with both opt in and opt out versions of my contract) "I have had a look at the two contracts you sent us. Although there are differences between the two, none of these seem determinative in terms of IR35." Fiction, opt-in
My recruiter "Most freelancers choose to opt out because of IR35." Fact, opt-out
My accountant "In theory, opting in or out should not have any implications in the event of an IR35 investigation." Fiction, opt-in
Contractor UK "I myself believe that operating within or without the regulations will be an IR35 neutral point… Overall, I find it difficult to see that there is any sound commercial reason why a contractor providing services through an agency would wish to opt out of the new regulations." Fiction, opt-in

Still not sure whether to remain in, or to opt-out?

Try reading the Recruitment and Employment Confederation help sheet

How to opt-in or out

How to opt-in

By default you are "opted-in" to the regulations, so you don't have to do anything to opt-in, unless you have previously opted-out.

How to opt-out

In order to opt-out, you need a written opt-out notice, signed by you "the worker" and you again as "the representative of the limited company", which must be given to the recruitment agency. However, you can only officially opt-out before you meet the client, so the written notice must be received before your start date and also before any interviews with the client. Unfortunately, if you opt-out part way through a contract, the opt-out won't take effect until you finish the role.

How to opt back in

If you have opted-out, changed your mind and now wish to opt back in, you follow the same procedure as opting-out, except you say you wish to "withdraw the opt-out". Like opting-out, if you withdraw an opt-out part way through a contract, the opt-in won't take effect until you finish the role.

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