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APSCo responds to budget with warning of the major impact on the professional flexible labour market and public services

Responding to today’s budget statement, Samantha Hurley, Head of External Affairs at the Association of Professional Staffing Companies (APSCo), comments:

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“HM Treasury has today announced that there is to be a new duty on the public sector to ensure workers who are engaged through a PSC pay the right tax. While we support this in principle, HM Treasury has also said in the small print that when recruitment firms are involved, they will be deemed responsible for assessing employment status for tax purposes and consequently liable for the payment of taxes.”

“This is clearly unjust, because determining someone’s tax liability is highly complex.  The IR35 tax rule, which governs the tax paid by PSCs, is not a simple test and requires detailed understanding of many aspects of a worker’s relationship with the client, and of a PSC’s day to day operations.  But recruitment firms simply do not have sight of the reality of the working relationship.  It is, therefore, entirely unreasonable to expect them to make this decision, and be financially liable for it.”

“Deeming provisions in tax law have been challenged repeatedly in the courts, and clearly there is a huge principle of fairness that should apply to all tax payers, including recruitment firms.  The proposals seem to totally contradict recent government reviews. The Office of Tax Simplification has just conducted a review of small company taxation and is also undertaking a cross departmental review of tax and benefits relating to freelancers.  Additionally, Julie Deane, CEO of the Cambridge Satchel Company, recently completed an independent review of self-employment for the government. Yet none of these reviews were mentioned today.”

“I believe that few, if any, recruitment firms will be willing to take on this type of liability.  This will stop the vast majority of PSCs from providing services to the public sector, significantly impacting its ability to access the specialist skills it so badly needs.”

“The only light is that the proposal is not due to take effect until 2017 and HMRC has announced that it will enter into a consultation process in the meantime.”

“APSCo will consequently vigorously fight this unreasonable proposal on behalf of its members, and will be asking the Government to publish its assessment of the impact this will have on the delivery of public services, because I find it hard to believe they’ve properly assessed the effects.”