Whilst there recently have been a number of complaints about HMRC’s proposed reporting obligations under the new Agencies Tax legislation, the Association of Recruitment Consultancies (ARC) believes the better target for these complaints would be the inherent unfairness within the legislation itself.
This unfairness is a subject that ARC has addressed in a campaign launched in May 2014. It believes that the supervision, direction or control test (SDC) is ‘unworkable’ and the defence that an agency relied on a ‘fraudulent’ document provided to it too hard to achieve, leading to uncertainty and risk.
Adrian Marlowe Chairman of the ARC said “With no clear case precedents establishing what ‘SDC as to the manner’ actually means, this leaves the failure to pay the tax attractive only to agencies that are happy to chance their arm. In our view the SDC test is outdated and confusing, and to be fair it should be replaced with a more simple understandable test which establishes genuine self-employment status for this tax purpose.”
Regarding the fraudulent document defence, ARC argues that ‘fraud’ implies dishonest intent and an agency would not be able to tell whether a document it has been given has been submitted with this intent. A ‘false’ document may be fraudulent but it may also be mistakenly or honestly given under a misapprehension. How is the agency to distinguish?
Marlowe suggested “It follows that a change of the word ‘fraudulent’ to the word ‘false’ would provide a simple and straightforward defence that agencies can rely upon. We seek this amendment.” He continued, “If no changes are made to the rules in these areas, risk averse agencies will only pay on a PAYE basis. Despite HMRC’s assurances that this is not intended to affect the genuinely self- employed, it amounts to a blanket measure hindering agencies from being able to work with them, including those working under the Construction Industry Scheme. Since many genuinely self- employed workers work through agencies this can only lead to attempts at avoidance or withdrawal of some workers from the agency market, neither of which in our view is healthy for the industry.”
Marlowe concluded, “From the recent response we have received from the government there is a sense that this self-employment box has been ticked and the government is moving on. Yet fairness dictates the rules need reviewing. This is a great opportunity for the Treasury to iron out the SDC test and regularise the tax take without facing the usual tax avoidance challenges from the less risk averse”.
ARC continues to press the Treasury. For more information or to support this campaign call ARC on 01273 777997.