Amendments to the Finance Bill announced recently identifed recruitment agencies as liable for any unpaid tax and national insurance contributions for self-employed temporary workers in their supply chain, according to professional employment provider, giant group.
Agencies will also have to prove self-employment, in particular that the worker is not subject to control. From April 2015, recruitment consultancies will be required to report quarterly to HMRC on all gross payments made to workers and/or intermediaries. There will be no legal defence other than where fraud is involved, and targetted anti-avoidance provisions (TAAR) will focus on those consultancies who try to circumvent the legislation.
However, giant advises, that within the finer details of the Finance Bill, recruitment agency directors will be held personally liable for unpaid tax and potentially National Insurance as a result of false self-employment claims.
Changes to Clause 16 of the Bill have confirmed that directors would receive personal liability notices should the recruitment consultancy involved fail to pay. The legislation goes on to state that, if there is more than one involved in the company, all directors will receive the notice and will be jointly liable to pay HMRC.
The notice would detail the amount payable, including interest (which runs from the date the notice is served), and the director(s) have 30 days to pay HMRC. Director(s) may appeal against this within 30 days of the notice being served, detailing the grounds on which they appeal.
Matthew Brown, Managing Director of giant commented:
“While we welcome the expected crackdown on tax avoidance in the Finance Bill, the personal liability amendments are incredibly harsh on recruitment agency directors. For these individuals, the need to ensure all workers in their supply chain are not paid as self-employed workers is now more important than ever.”
“Agencies and RPO’s that contract directly with the hirer need to undertake a detailed review of all their current workers and their intermediaries to determine how workers are paid, and to assess their risks, moving workers were necessary. However, by putting in place and enforcing a strict Preferred Supplier List, agencies can manage their financial risks.”