This piece of legislation came in on 6th April 2014 and with it a host of new risks to the recruitment industry. However, on this occasion, there are personal risks to Directors and not just to the businesses themselves.
What does this legislation mean to the recruitment industry?
In a nutshell any individual who is subject to any degree of supervision or control with respect to how they do their work will no longer meet HMRC’s criteria for being taxed as self-employed.
For example, if an agency sends someone to work on a building site and the worker is being paid as a CIS sole trader, usually by a third party intermediary / pay company and there is control and supervision (or the right exists) anywhere in that chain HMRC will consider this to be “false self-employment” and will expect the agency to account for PAYE tax and National Insurance on the payments made to the pay company.
Typically this could add 10-25% to the cost of supply. Most agencies are unable to find this extra money from their margins and their clients are reluctant to accept increased charge rates so the safest options are for the agency to pay the worker direct as an agency PAYE worker or engage with an umbrella company which employs the worker and operates PAYE.
It’s important to ensure the umbrella company is compliant and operates PAYE correctly otherwise the agency could still find itself in hot water.
Why is it personal?
If it is discovered that your workers are falsely self-employed or that your umbrella company is not correctly using employment contracts and operating the PAYE scheme in the right way, HMRC will issue penalties against your business and these penalties must be paid within 30 days. Debt notices will have to be paid even where you believe you have operated correctly.
The only defence a recruitment company has is where fraudulent documents have been provided to them (either from an umbrella company or client). Simply having a letter from an umbrella company to confirm the worker is being paid PAYE is not proof enough.
Where the recruitment business fails to pay the debt HMRC will issue a “Personal Liability” notice against the directors of the business – as we said, it’s personal!
How can I protect myself and my business?
Talking to Simplyco about our compliant umbrella company would be a great place to start. We are and always have been a UK based company (no offshore issues to worry about either), our financial standing is good, compliance comes as second nature to us, we’ve been around for a long time and we know the recruitment industry inside out.
Choose to partner with Simplyco Umbrella and you are choosing a life more compliant.
Talk to Paul Murphy on 01900 898 433 or email firstname.lastname@example.org.
Simplyco are expert contractor accountants and work to make life less complicated for their clients. If you would like to hear how we can make things simpler for you, please give us a call on 01900 898 440 or email email@example.com.
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