Recent Article: New Taxation Legislation - Businesses could lose millions

With reference to the Onrec article ìNew tax legislation - Businesses could lose millionsî, posted on 9th July we are concerned at the sensationalist content.

The MSC legislation has still not yet been finalised. The government has just announced 5 new statutory instruments which will be laid before Parliament once the Finance Bill receives Royal Assent. We are told that these instruments will be effective from 6th August 2007. These instruments do not provide for or reflect any of the following:

1. ìthe intention of the legislation is to wipe out MSCsî. We disagree. The stated intention is to enable HMRC to collect proper taxes when they are due, and the legislation actively contemplates the continuing existence of MSCs

2. ìall contractorsÖin breachÖ..will face a gross bill to reclaim tax and NI as well as a penalty fee and a black mark against their careerî. We disagree. Any person who does not properly pay tax due clearly will run the risk of being obliged to pay the underpaid sums. I do not understand why this should amount to a black mark against their career unless they pick up a criminal conviction in the process, which only the most fraudulent and determined tax evaders may possibly do

3. ìall 3rd party organisations that employ contractors and MSCs will also be targeted.î Again We disagree. The Treasury has already confirmed that companies that pay only by way of employment income are excluded from the scope of the legislation, and this is reflected in the draft legislation. In any event agencies do not usually employ contractors. Further the Treasury has made it clear that it will only target those recruiters that are actively involved in promoting MSC providers, leaving the rest free of worry on the face of it.



4. ìcredibility and reputation of businesses within the industry would be at stake if a company if seen to be associated with an MSCÖ.particularlyÖ.. recruitment agencies.î There is no legislative or other rule that we are aware of that prohibits dealing with MSCs. The issue is only one of risk of exposure to a third party tax claim, and to suggest otherwise is non sensical and unnecessary scaremongering.

5. ìthese illegal tax operationsÖÖ cost the UK economyÖand HMRC will Ö.make an example of all found to be in breach.î. Are they illegal? How does anyone know what HMRC will actually do?

This is not to say that agencies face no risk if they use MSCs. However the risk is not as drastic as described.

Adrian Marlowe, MD of Lawspeed said ìWhat agencies need is to be able to assess, understand and minimise the risk associated with using MSCs. More information on the real risk and avoidance steps, including the stance that HMRC is actually taking, can be obtained from the horseís mouth so to speak. Lawspeed is holding its second seminar on this erudite issue at which the senior HMRC spokesman on this and related aspects will be speaking. Date 25th July 2007 ñ central London.î

David Vincent, also of Lawspeed, said ìThere are only a few places left at the London seminar. To book, call Lisa on 01273 236236. Also see www.lawspeed.com. We will also be holding seminars around the country on dates to be advised ñ for more information, or to register, please call Lisa.î

Lawspeed Ltd
The specialist to the recruitment industry
10th July 2007