Last year, Baxter Personnel encountered a large number of recruitment agencies trying to undercut their rates. In terms of the costing, we have come across our clients being offered disturbingly low rates on more than one occasion meaning one of two things… either the agency is making a loss or it is running a tax avoidance scheme designed to reduce costs and increase profits. In this case, if the price looks too good to be true – it generally is.
Back in 2014, Andrew Harrow, Managing Director of Baxter Personnel said “We carried out a 6 month feasibility study into Baxter Personnel adopting this kind of scheme at the end of 2013. The reality of the situation however is that HMRC have outlawed this practice and this decision has been upheld many times through the courts. In any case, taking more of a holistic view of things, Baxter Personnel is better off that its name stays well clear of headlines containing “tax avoidance” and “worker exploitation” etc. even if this means running the business at a higher cost.”
HMRC have now published guidance on employment intermediaries reporting regulations due to be put into place from the start of the new tax year.
On 6th April 2015 the new employment intermediaries reporting regulations come into force. All agencies must now report to HMRC every 3 months details of all workers they place with clients where they don’t operate PAYE on the workers’ payments.
Helpfully, HMRC recently published guidance on what this means for intermediaries, workers and clients. This clarifies what information is required and who from.
For those contractors paid via an umbrella at other agencies, only identity details are required from the agency, not payment information.
PSCs that provide their services via an intermediary will need to be included in the intermediary's reporting.
This is likely to prove to be a rather onerous burden for some agencies that are not already following these guidelines.
You can find out more on the new guidance here.
Umbrella update
With the Government consultation on travel and subsistence and the use of overarching contracts now closed, speculation is rife as to the possible outcome/s.
Given that the removal of T&S relief and OACs could spell the end for many high quality compliant businesses, the Freelancer & Contractor Services Association (FCSA) has called instead for umbrella companies to be licensed under its code of conduct. Payme would strongly support this idea - we think clear parameters as well as mandatory annual inspections would ensure compliance and root out those rogue operators that give the industry a bad name.
Recognition that most umbrellas are performing to high standards, came from the Government itself earlier this month. David Gauke MP, Financial Secretary to the Treasury said, “Umbrella companies have been a part of the UK labour market for many years and, when operated responsibly, provide a useful conduit through which payments, including tax, can be made. As such, Her Majesty’s Revenue and Customs are not taking steps to stop agencies using umbrella companies.”
It's good to know the Government is not looking to prevent umbrellas from operating. However, we hear from a trusted source that they may only be able to do so over a certain pay rate, meaning the end of the low pay umbrella sector. We wonder whether this is fair - why should only high paid workers be able to claim travel and subsistence?
We'll soon see what's in store for umbrellas - any legislative changes will be announced in the Budget in March.