Entrepreneur visa refused (contract via recruitment agency)

[Teja527]

Hi p2s7721,

It sounds amazing that you have won appeal, Congrats to you. Your patience has been paid off.

My application got refused under the cause of Contract via recruiting agency. I launched the appeal against HO decision and got the hearing date too.

Applied on: 28th Aug 2014
Appeal launched: 3rd March 2015
Hearing date: 14th Sep 2015.

Im in the same situation like you were in, very frustrating period. I read all of your responses, very thankful to you for updating all of us your status on timely.

Fingers crossed, I'm hoping for positive news in my hearing. Could you please advice me if there is anything i should document for hearing day?

Many thanks in advance.

[Sonia...]

I have been working as an IT Contractor with an agency in the category of Tier 1 Entrepreneur visa for last two years. Currently I am doing my fourth contract. As a matter of fact I also have a strong accounting background and so file all my accounts, VAT, payroll, etc, on my own. Let me also confirm that I have two other peers who also happen to work as contractors with an agency in this category. Both works as Cost Accountant in two separate companies.

I might have to draft an entire theses to explain how its possible as I have to gradually build your concepts in terms of few important policies of HMRC but I will give my best shot with references to HO documents. Can I also request everyone to share any of your understandings with references to Home Office links or documents. There is no point sharing your knowledge if you cannot justify it with authentic source.

I believe many of the members in this discussion assume that the role of agency is to hire (employ) an individual and then send him to the client base on its behalf. Yes that is what agencies were limited to only 8 to 10 years ago. With the growing trend of contracting, agencies have now expanded its role and started to fill the positions of contractors where they do not actually have to hire (employ) anyone anymore. Instead of signing an employment contract with you directly, the agency signs a contract with your company and another contract with its client. Yes you still work at client base, but only as a sub-contractor (contractor of an agency), rather than an employee of an agency. The client pays the agency and the agency pays your company after keeping its markup. So none of the parties have to run payroll or hire/employ anyone.


Now here comes the complicated bit. The contract agency signs with your company must comply with the 'AGENCY LEGISLATION (a law similar to IR35)'. In other words the contract must mention a clause along with many other clauses that its a 'CONTRACT FOR SERVICES', rather than 'CONTRACT OF SERVICES' (I will explain what agency legislaiton and contract of /for services mean in a bit) but before that please go through the following part taken from Home Office document.

Genuine entrepreneur activity no contract of service with another business)

Migrants must only work for the business or businesses they have established, joined or taken over. Working for such business(es) does not include any work the applicant does pursuant to a contract of service or apprenticeship for another business, whether express or implied, oral or written. The migrant must be:

- Employed as the director of the business they have invested in
- Working in a genuinely self-employed capacity

Where a migrant enters into contracts with another business in this capacity this will normally be regarded as contacts for service.

They may not be considered to be working for their own business if the work they do is considered to be employment by another business. For example, where the migrant’s work involves the business, in effect, hiring them for their labour or to fill a position or vacancy. This includes where the business hires the individual using a recruitment or employment agency.

Contracts entered into by the migrant with another business in this capacity will normally be regarded as contacts of service.This applies even if the applicant claims the work is undertaken on a self-employed basis.

You must consider the factors set out at ‘Employment status Index’ when you consider if the migrant’s work amounts to:

- Genuine self-employment - work for the business they have established, joined or taken over
- Employment by another business

If you consider an applicant’s work to be employment by another business, you may consider them to be working in breach of their conditions of stay. This makes them liable for curtailment and/or removal action.

The points shared above are extracted from the following Home Office document (Page 5): https://www.gov.uk/government/uploads/s ... .0_EXT.pdf Please pay close attention to the points I turned bold which clearly state that you are allowed to engage in a contract with another business unless its a CONTRACT FOR SERVICES (in other words the contract comply with agency legislation) and you are working either as a director or self employed.

[Sonia...]

Now if you have come this far, many of you might be wondering what do you actually mean by all these jargons such as contract of/for services, agency legislation, etc and how can you ensure that your contract with the agency complies with it. Well its all pretty simple but first I need to explain what all these terms mean as having firm grip of these policies is crucial to ensure that your agency contract complies with it.

AGENCY LAW:

If you are subjected to (or to a right of) any supervision, direction, or control as to the manner in which you provide your services during your arrangement/contract, you are subjected to agency legislation. Generally it is considered as 'Contract of Services' as you are working in a manner/relationship of employee of that business although on papers you are a contractor.

However if you are given a free role to complete your task with no one being able to intervene to instruct/manage how the task must be created or look like. The only specific requirement placed on you is that the task for which you are being contracted must be completed and activated before your engagement ends. Generally it is considered as 'Contract for services'

Working at client bases doesn't have to do anything with agency law. You may work at client base throughout ur engagement and will not be subjected to agency legislation/contract of services unless you are not subjected to supervision, direction, or control at client base.

To look deeper into agency legislation, please go through the following link: http://www.hmrc.gov.uk/manuals/esmmanual/esm2029.htm

At this point if you have understood the concept of agency legislation the next big question for many would be how are you supposed to ensure or request you agency to come up with clauses that make you contract compliant with agency legislation (contract for services). Well the good news is 95% of contracts are already compliant with agency legislation. It must include the clauses complying to agency legislation and clearly state that the agency has engaged you in a contract for services. That is because agency legislation/contract for services is not specifically designed for Tier 1 entrepreneurs, but in fact it's designed for all agency contractors irrespective of his/her status. In short, either a contractor is in Tier 1 category or he/she is a UK/EU citizen, all of them along with their agencies have to comply with it. In case an agency is unable to comply with the legislation then it becomes a relationship of employer/employee (contract of services) b/w the agency and contractor and the agency is supposed run payroll/PAYE for its contractor.

Since its a requirement imposed by HMRC on everyone irrespective of his visa status, you don't need to worry about your contract at all. You just need to confirm that its a agency legislation compliant contract. As for the agencies which are unaware of this categories, you need to explain them that you are fully allowed to work as a contractor unless its contract for services (agency legislation compliant) and use the above references. Since agencies are already in the business of designing agency legislation compliant contracts, they will treat you and your contract the same way.