Charterhouse advises recruiters: Know your enemy!

2008 Sees Managed Service Company (MSC) Legislation Present Final Hurdle In PAYE and NIC Compliance - Third-Party Debt Liability

Recruitment companies and temping agencies risk being held responsible for non-payment of PAYE and NIC debts by the managed service companies of their candidates, thanks to the final episode of the new UK Managed Service Company (MSC) legislation, according to Charterhouse Group International, the leading provider of remuneration solutions to the global staffing industry.

From January 2008, the UK government can recover PAYE and NIC debts incurred by MSCs from a third party if they can't be obtained directly from the worker. This could extend to any third party that was involved in promoting the services of the managed service provider to the worker, such as a recruitment agency.

Although the legislation has been purposely drafted to have broad coverage, HM Revenue & Customs has indicated that it's not designed to penalise organisations that have taken appropriate steps, said Sandra Robertson, Charterhouse operations director, Our recommendation is to be absolutely certain of the structure that your contractors or temporary workers are using.

Key criteria for examination when a worker is not using an umbrella company to receive earnings:

- Is anyone other than the individual a director of the company?

- Is anyone other than the worker a signatory on the company's bank account?

- Does the worker receive company advice from anyone other than a suitably qualified accountant or lawyer?

If the answer is yes to any of these questions then a managed service provider is involved and there could be a risk of tax debt liability for third parties.

One solution to mitigate the risk is to promote the use of an umbrella service; but care is needed in selecting an appropriate service provider. Those that offer additional solutions such as personal service companies, employee benefits trusts, actually fail to eliminate risk. The agency might be unaware should a worker choose an option other than the umbrella service.

Recruitment companies should also consider the overheads and ongoing management and administrative workloads involved in payrolling temporary workers themselves. These tasks can all be easily performed by an umbrella company, to leave recruiters to focus on core business.

So if you are too busy to worry about the consequences of the MSC legislation, then the easiest, smartest and risk-free way to accommodate temporary workers is to recommend FPS Umbrella. With FPS Umbrella there is no risk to the recruitment agency or to their candidates. This is simply because the legislation does not apply to umbrella companies.