BREAKING NEWS - BUDGET
30 August 2012
Chancellor delays tax liability for agencies
Chancellor Gordon Brown has delayed legislation that makes recruitment agencies liable for the unpaid taxes of contractors.The legislation will now relate to taxes owed from 6 January, 2008, and not 6 April 2007, as had originally been envisaged.
However, the clampdown on composite companies (Recruiter, 21 March) themselves is going ahead. Contractors working through composites will have to go on to the Pay as You Earn system. Many contractors will now switch to work through umbrella companies, or Personal Service Companies (PSCs).
The delay in the transfer of debt legislation follows months of intensive lobbying from the recruitment industry in the run-up to today’s Budget.
Recruitment and Employment Confederation (REC) external relations manager, Anne Fairweather, welcomed the move. She told Recruiter that the REC's hard work had “paid off in spades”.
Further, there is now no question that the definition of Managed Service Companies will include employment businesses.
Marcia Roberts, REC chief executive, said: “The delay on transferring debt liabilities to agencies until January 2008 is a fantastic win for the recruitment industry. This respite will allow professional recruitment agencies to assist their contractors in deciding about how to incorporate without being hit with debt transfer liabilities.
“Equally important for recruitment agencies is the tightening up of the definition of an MSC. The Treasury is right to tackle abuse within the MSC market, however the original definition of MSC was drafted too widely and could have caught recruitment agencies and even some contractors.”
