You must be compliant with the Employment Agency’s Act and associated Conduct Regulations. Some more detailed examples are set out below:

a. it is illegal to collect payment on behalf of tutors (self-employed or otherwise) that you introduce to clients unless your company (and not the tutor) is providing the tuition service – in which case you have to charge VAT on the tutor’s part of the fee in addition to your commission;

b. it is illegal to charge tutors a fee (even if it is described in a different way such as ‘commission’) for introducing them to clients;

c. agencies must fulfil the necessary safeguarding, health and safety and other checks required under the Act (these go beyond an Enhanced DBS)

Directors of tuition companies that breach the above requirements are breaking the law to the criminal standard and may be prosecuted or prohibited from running an organisation, and the court also has the power to issue unlimited fines under the 1973 Employment Agencies Act and the 2003 Conduct Regulations.

The Conduct Regulations apply to England, Wales and Scotland.

EAS has provided detailed guidelines showing how Tuition Companies can become compliant. You can read these guidelines here but in summary there are two possible routes:

a. Employment Business, whereby your company engages with an employed, or subcontracted self-employed tutor to provide services on behalf of your company to your company’s client. In this model you would be required to charge VAT on the entire fee (including the tutor’s fee).

b. Employment Agency, whereby you send the client two invoices – one from your company that outlines your commission/fee + VAT, and a second invoice directly from the tutor to the client (without VAT if an exempt supply). For convenience, you can send the client the tutor’s invoice along with your invoice, but you cannot collect payment for it. This payment has to go directly from the parent to the tutor and the parent will in all cases be aware of the amount you get as your commission and the amount the tutor gets.

PLATFORM or PUBLISHING models are captured by EAS legislation, thus you must operate as either an Employment Business or an Employment agency, as the provision of information alone is enough to be captured under EAS legislation. Depending on your chosen operating model, you will need to comply with the associated conduct regulations. Failure to operate as either an Employment Business or Employment Agency and comply with the regulations is a criminal offense.

The traditional model whereby the agency sends the parent an invoice on behalf of the tutor, collects the funds on behalf of the tutor (even if this is into a trust or client account), then deducts the agency commission and passes the balance to the tutor a breach of the law and is a potential criminal offence. TTA has worked with various members and EAS to collectively negotiate a compliance period. TTA members will have until the 31st of December 2022 to change their business model and/or processes in order to be compliant with the rules. As the industry’s professional body, TTA has a duty to ensure that all members operate legally. For that reason, all members must declare and specify the compliant business model they intend to use to TTA by the 31st December 2022; failure to comply with the law will mean that their TTA membership will be revoked. Further communication will be sent in the near future in relation to this. TTA exists to protect and set apart reputable tuition providers and an essential core principle of TTA membership is that all members should comply with relevant laws and regulations.

a. Extended Deadline

The good news is that EAS wants to help make compliance possible without putting undue pressure on the industry. EAS are giving the industry sufficient time to change their business models. They have agreed to a deadline of 31st December 2022, by which time all companies need to be operating as either of the two permitted options outlined above (Employment Business, or Employment Agency). EAS have made it clear that no further extension of this deadline will be granted; any businesses that are non-compliant after this deadline will be liable to prosecution. EAS have assured TTA that, other than where complaints are received by them (e.g., from tutors or clients), they will not initiate enforcement action against TTA members prior to the 31st of December.

b. Stripe Connect

EAS have in principle accepted that a payment handling scheme that allows tuition agencies to use Stripe Connect to automatically split the payment into the tutor part and the client part might be compliant depending on its careful operation. This allows one statement to be sent to the client, (with links to see the individual tutor and agency invoices), but it only requires the client to make one payment, to a third-party payment provider. This can be made on a card, or BACS. Many of you will be familiar with TutorCruncher, who have developed a system that should be compliant; other companies may commission the design and implementation of such systems as well and we will share details of these as we become aware of them. It is important to note that you must not control the payment mechanism.

It took a great deal of work with EAS to agree that “Stripe Connect” payment process detailed above can be compliant, if carefully operated. It is imperative that employment agencies who use this model (rather than sending two invoices and collection separate payments) respect the following conditions: – You cannot force a tutor to use the Stripe Connect system (or to specify how they will be paid by the client). They are free to take cash payments, cheque or any other form of payment from the client that they choose, if they wish.

– Tutors and agencies will each need to set up individual Stripe accounts (in addition to their bank accounts into which funds will ultimately be received) to use this system. So, if your agency works with 400 tutors, each will need their own Stripe Connect account. You cannot set these up on their behalf. – Tuition agencies are not permitted to operate Stripe Connect accounts themselves. These must be operated by a third party not related to the tutor or the agency.

c. Question & Answer Webinars

TTA will be running a series of webinars to explain the problem and answer questions. EAS will provide a senior representative to answer questions in a further webinar. The first two Webinars were held on the 6th and 7th of July. This gave a background to the changes and the legal challenges already made.

The only business models that are compliant are:

● Employment business, where the tuition company has a legal relationship to provide the tuition to the client and employs or subcontracts (i.e., to self-employed tutors) other companies, or individuals to deliver the tuition work. VAT is payable on the full cost of tuition, including the part paid to the tutor as their fee.

● Employment agency, where the tuition company introduces a tutor to work directly for a client, taking a fee/commission from the client in return. As the tutor is paid separately by the client and the tutor’s fee is never under the control of the tuition agency, VAT is only liable on the tuition agency’s fee/commission. VAT is not normally payable by tutors delivering tuition personally (either because it is below the VAT threshold or because the tutor is a sole trader).