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Debt transfer FAQs
We send out checklists to providers, is that enough?

The simple answer is no, we do not believe that a checklist approach is robust enough to fully protect the Agency.

The only time an agency needs to carry out any form of due diligence on a provider is when they are looking to make recommendations to their contractors. This is where a greater analysis of the rules is required to ensure an agency remains entirely protected. This analysis needs to be broken down into two parts:

Due diligence requirements to protect an agency from debt transfer

Due diligence to assess a providers compliance

The level of due diligence an agency is required to carry out to be in a position to successfully appeal a debt transfer notice is completely different to the level of due diligence required to assess whether a provider is compliant. This aspect of the legislation seems to be the most commonly misunderstood.

Whilst agencies need to ensure they have robust and demonstrable due diligence procedures in place to protect them it is unlikely that these procedures would be detailed enough to fully assess a providers compliance to the satisfaction of the contractor.

If a provider is found to be caught by the MSC legislation and so the contractor receives a debt transfer notice, it must be remembered that the contractor can only appeal that decision by demonstrating the decision is wrong based on legal arguments. They cannot appeal the decision based on any aspect of due diligence taken to assess the providers compliance. This is where the conflict and confusion arises.

The agency is in a completely different position as they are able to appeal any notice through the due diligence they carried out. If the due diligence carried out by the agency was seen to be robust, their appeal is likely to be successful.

In a situation where an agency recommends a provider on which they have applied relevant due diligence and that provider is subsequently found to be caught by the MSC legislation, the agency could escape any liabilities however; all their contractors could still find themselves fully liable. In this situation, the agency is likely to find itself at the centre of a legal action brought by the contractors. This would centre around the level and extent of due diligence the agency carried out in its assessment of compliance.

What further compounds this confusion is that there is no assessment, not even the proposed HMRC audit standards, that can guarantee a providers compliance with the legislation and offer protection to the contractors.

As a result, we believe, the level of due diligence required by an agency to safely operate a PSL and make recommendations becomes completely cost prohibitive.

To try and quantify this, Professional Passports audit on an accountancy service provider involves approximately 5 days in the provider\'s offices carrying out meetings with directors and staff, examining client records, assessing processes and procedures and observing client interaction as well as observing the handling of new enquiries. There is also approximately a further 5 days work reviewing all marketing material, websites, internal documents, manuals and training guides. Each accountancy service provider audit takes no less than 10 days work. In the case of an umbrella provider we would be in their offices for 2-3 days and the review of material takes a similar time. Only after this level of detail has been applied and we feel their operating processes are compliant, do we feel able to recommend a provider to a contractor as compliant. There is no short cut to this and any agency that is not applying this level of assessment runs the risk of future action.

Professional Passports audit of providers not only looks in detail at every aspect of the providers operation in relation to the legislation but also examines their approach to customer service, providing what we believe to be the most complete and robust assessment available.

Any agency using the service has moved the responsibility of duty of care to Professional Passport as it is Professional Passport that is making the recommendations.

Professional Passports audit has received independent validation by insurers to the extent that we are now able to offer agencies an insurance of £5,000,000 included in the membership fees, against any debt transfer liability that the agency was unable to successfully appeal. Unfortunately we cannot offer that assurance to contractors as the legislation strictly prohibits us from doing so.

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