MSC audit scheme

Following representations put forward by Lawspeed on behalf of the newly formed Association of Employment Management Companies (ìAEMCî), HMRC and the Treasury has abandoned the idea of introducing an audit scheme in the foreseeable future.

In recent months HMRC had announced that it was considering a scheme which may allow for certain third parties to assess whether a provider organisation is compliant with the MSC legislation. However it had held back from making a quick decision despite pressure from various quarters to do so.

In announcing its decision not to proceed for now, HMRC has said that it will discuss the impact with external stakeholders.

Adrian Marlowe of Lawspeed said ìThis is a tremendous result both for umbrella companies and recruitment agencies. So far as umbrellas are concerned there were elements of the scheme that appeared to give an advantage to various providers in an unfair, and, some would say, unnecessary way. Also there were serious questions about the legality of any scheme for a number of different reasons, some technical and some practical. With regard to agencies in reality the only advantage of an audit scheme would be to guarantee that they are not liable for MSC contractor tax if they refer or recommend to an audited provider. Since HMRC could not agree to that for legal reasons, the idea of an audit scheme was always going to be of doubtful benefit. In addition an audit scheme had the potential to confuse agencies and limit the market.î

Adrian went on to say ìin fact HMRC has issued some helpful guidance that agencies can rely upon. Where a contractorís company already exists at registration with an agency, the agency is unlikely to be liable if the company turns out to be an MSC. Also an agency cannot be liable if it recommends a candidate to an umbrella company that pays only by way of employment income. In all other circumstances agencies should take care not to refer or recommend and should seek advice if in doubt.

With only a few weeks to run before agencies could become liable for MSC tax (6th January 2008) this issue does require urgent attention by those who may have been relying upon the emergence of an audit scheme and who otherwise have done little to prepare.

For more advice please call Lawspeed on 01273 236236.

The AEMC is a membership trade body recently set up to represent the interests of umbrella companies and to operate as a flag for quality umbrella providers. For more information or to join please call Adrian Marlowe on 01273 236236 or Jonathan Hughes on 0845 045 1021.