Will the onshore intermediaries legislation be a case of repenting at leisure?
14 March 2014
Recruitment industry trade bodies and industry experts have criticised important aspects of the government’s review of responses to the consultation on onshore employment intermediaries legislation that is due to become law on 6 April.
Fri, 14 Mar 2014
Recruitment industry trade bodies and industry experts have criticised important aspects of the government’s review of responses to the consultation on onshore employment intermediaries legislation that is due to become law on 6 April.
John Chaplin, director human capital at EY (formerly known as Ernst & Young), tells Recruiter that while he supports the aims of the government to crack down on false self-employment, “I don’t think they are doing the right thing”.
Chaplin says the legislation has been rushed through, telling Recruiter “there is a definitely a danger of this being a case of fools rush in and repent at leisure”.
Sam Hurley, head of external relations at the Association of Professional Staffing Companies (APSCo), tells Recruiter that that she is “very concerned that that they haven’t included any real statutory defence for agencies when they have done everything they possibly can to make sure the intermediary below them in the supply chain is compliant”.
Hurley says she is particularly concerned that where agencies are supplying staff to an end user through an RPO, there is no defence if they are given fraudulent information by someone else in the supply chain, indicating that the workers are self-employed when this is not the case. “My initial feeling is it isn’t good enough,” she says.
Main points of the legislation
• Legislation to be introduced 6 April 2014
• Under the proposed legislation, the staffing company or MSP, which holds the contract with the end client, will be liable for the tax and National Insurance Contributions (NICs) of workers supplied by them or by an intermediary in the supply chain – on a sole trader/self-employed basis unless the staffing company or MSP can prove to HM Revenue & Customs that those workers are not under the control, supervision or control of anyone
• The reporting/returns requirements on agencies and MSPs, and associated penalties will come into force in 2015, with the first report due by 5 August 2015, reporting on Q1 2105. Under these rules, where agencies place workers for whom they are not deducting income tax and NICs, they will be required to hold detailed information about those workers, including the name and address of the intermediary and why NIC was not deducted.
In a statement, the Recruitment & Employment Confederation (REC) tells Recruiter: “A measure to ensure agencies are not held liable where they are provided with fraudulent documents by clients or subcontractors that mislead as to the reality of control being exercised has also been introduced. While this stops short of a full ‘reasonable due diligence’ clause, it is another win for compliant agencies that seek to engage with the spirit of this new legislation.
“End-user clients or subcontractors that do wilfully mislead agencies will end up being held liable for tax and NICs themselves, a move that should help cut down on avoidance.”
Derek Kelly, managing director of umbrella company Parasol, tells Recruiter that his overall sentiment towards the legislation is positive. “There are lots of structures out there that are using self-employment to avoid tax: it is absolutely the right thing to do.”
And he supports the government’s decision to bring the legislation in quickly. “I quite like them doing it quickly: it stops people thinking up clever solutions [to circumvent the legislation]. It will take out all the dodgy processes over night,” he predicts.
However, he says his big concern is the construction industry. “If CIS [the self-employed scheme within the construction sector] workers are classed as employed, and 90% will be, suddenly you have got a cost increase – as a minimum employers’ National Insurance of 8%-9% – and who is going to pay for that.”
Liz Longman, MD of TEAM (The Employment Agents Movement), tells Recruiter that she doesn’t think the legislation will improve the sector. “No, not really – I don’t know how it will stop unscrupulous people looking for loopholes.”
Matthew Brown, MD of giant Group, says the legislation will mean enormous changes for agencies. “Agencies should ensure they don’t supply any self-employed workers unless they are 100% sure they are genuinely self employed.” This will mean reviewing their supply chain, and putting a preferred supplier list in place.
There is unanimous support for the government’s decision to delay enforcement action and reporting requirements until 2015.
Kevin Green, chief executive officer at the REC, says: “We’re really pleased HMRC has listened to us and the industry and has agreed not to take enforcement action or impose reporting requirements until the middle of 2015. Common sense has prevailed.”
John Chaplin, director human capital at EY (formerly known as Ernst & Young), tells Recruiter that while he supports the aims of the government to crack down on false self-employment, “I don’t think they are doing the right thing”.
Chaplin says the legislation has been rushed through, telling Recruiter “there is a definitely a danger of this being a case of fools rush in and repent at leisure”.
Sam Hurley, head of external relations at the Association of Professional Staffing Companies (APSCo), tells Recruiter that that she is “very concerned that that they haven’t included any real statutory defence for agencies when they have done everything they possibly can to make sure the intermediary below them in the supply chain is compliant”.
Hurley says she is particularly concerned that where agencies are supplying staff to an end user through an RPO, there is no defence if they are given fraudulent information by someone else in the supply chain, indicating that the workers are self-employed when this is not the case. “My initial feeling is it isn’t good enough,” she says.
Main points of the legislation
• Legislation to be introduced 6 April 2014
• Under the proposed legislation, the staffing company or MSP, which holds the contract with the end client, will be liable for the tax and National Insurance Contributions (NICs) of workers supplied by them or by an intermediary in the supply chain – on a sole trader/self-employed basis unless the staffing company or MSP can prove to HM Revenue & Customs that those workers are not under the control, supervision or control of anyone
• The reporting/returns requirements on agencies and MSPs, and associated penalties will come into force in 2015, with the first report due by 5 August 2015, reporting on Q1 2105. Under these rules, where agencies place workers for whom they are not deducting income tax and NICs, they will be required to hold detailed information about those workers, including the name and address of the intermediary and why NIC was not deducted.
Those employment intermediaries with the contract with the end-user will be required to complete the quarterly electronic return in which they will report those workers they have placed with the end client and not accounted for via HMRCs' Real Time Information system.
In a statement, the Recruitment & Employment Confederation (REC) tells Recruiter: “A measure to ensure agencies are not held liable where they are provided with fraudulent documents by clients or subcontractors that mislead as to the reality of control being exercised has also been introduced. While this stops short of a full ‘reasonable due diligence’ clause, it is another win for compliant agencies that seek to engage with the spirit of this new legislation.
“End-user clients or subcontractors that do wilfully mislead agencies will end up being held liable for tax and NICs themselves, a move that should help cut down on avoidance.”
Derek Kelly, managing director of umbrella company Parasol, tells Recruiter that his overall sentiment towards the legislation is positive. “There are lots of structures out there that are using self-employment to avoid tax: it is absolutely the right thing to do.”
And he supports the government’s decision to bring the legislation in quickly. “I quite like them doing it quickly: it stops people thinking up clever solutions [to circumvent the legislation]. It will take out all the dodgy processes over night,” he predicts.
However, he says his big concern is the construction industry. “If CIS [the self-employed scheme within the construction sector] workers are classed as employed, and 90% will be, suddenly you have got a cost increase – as a minimum employers’ National Insurance of 8%-9% – and who is going to pay for that.”
Liz Longman, MD of TEAM (The Employment Agents Movement), tells Recruiter that she doesn’t think the legislation will improve the sector. “No, not really – I don’t know how it will stop unscrupulous people looking for loopholes.”
Matthew Brown, MD of giant Group, says the legislation will mean enormous changes for agencies. “Agencies should ensure they don’t supply any self-employed workers unless they are 100% sure they are genuinely self employed.” This will mean reviewing their supply chain, and putting a preferred supplier list in place.
There is unanimous support for the government’s decision to delay enforcement action and reporting requirements until 2015.
Kevin Green, chief executive officer at the REC, says: “We’re really pleased HMRC has listened to us and the industry and has agreed not to take enforcement action or impose reporting requirements until the middle of 2015. Common sense has prevailed.”
