Recruitment agencies are likely to be subject to the new Money Laundering Regulations according to Barry Roback, Joint Chief Executive of JSA Group, which manages the financial affairs of over 4,500 contractors in the UK and overseas. This surprise revelation was made to the 70-strong audience of top recruiters at an update seminar on the new Conduct of Employment Agency Regulations and post Budget review. The seminar, which was organised and sponsored by JSA at the Great Eastern Hotel, Liverpool Street, was chaired by Ann Swain, Chief Executive of ATSCo and also featured Kevin Barrow, managing partner of Tarlo Lyons.
Roback pointed out that the definition of a ërelevantí business was not spelt out in the new regulations, and had been widely assumed to refer mainly to organisations such as banks, accountants, lawyers, estate agents and casinos. However, one of the listed qualifications included organisations ëissuing electronic moneyí. As virtually every recruitment consultancy paid its contractors electronically, it was hard to see how they could be exempt, he added.
Roback warned that recruitment consultants would therefore need to be vigilant in future about the provenance of their clients and contractors. For example, it was not unusual for a client to ask an agency to take over an existing contractor workforce. Unless the agency checked that the candidates actually existed or were genuinely qualified to carry out the tasks they were being paid, they could unwittingly find themselves party to a money laundering scam.
ìOf course agencies are already subject to the Proceeds of Crime Actî he told delegates, ìbut these regulations, coupled with the new Conduct of Employment Regulations, mean more unwelcome bureaucracy.î
Roback also flagged another potential twist to IR35, which was buried in Budget press release 5. This release states that the Revenue wants to ensure that ëtargeted tax incentives support the Governmentís objectives for growth, enterprise and productivityí and announces that Government proposes to ëconsider the issues raised by the interaction with the tax system of definitions of the income of self-employment and the remuneration paid to owner managersí. A consultative paper will be released in November 2004, which according to Barry Roback indicates the revisiting of IR35 and further legislation in next yearís Budget.
ì There is no doubt that agencies face a number of tricky issues that could effect the delicate relationship with their clientsî concluded Roback, ìbut at least there is the compensation that business in many sectors is looking much more positive than last year and placement rates are generally well up.î
For further information, please contact Barry Roback, Joint Chief Executive of JSA Group on 01923 257202 E-mail Roback@jsagroup.co.uk
Recruitment Agencies may be subject to money laundering regulations
.