Agencies warned over intermediaries' claims
10 September 2012
Recruiters are continuing to put themselves at financial risk, despite the debt transfer provisions of the government's MSC (managed service company) legislation, which came into force on 6 January, a
Recruiters are continuing to put themselves at financial risk, despite the debt transfer provisions of the government's MSC (managed service company) legislation, which came into force on 6 January, a senior Her Majesty's Revenue and Custom's (HMRC) policy adviser has warned.
Robin Wythes, HMRC's head of employment status policy, told recruiters at a seminar in London, organised by JSA chartered accountants: "I have been told as recently as two days ago of agencies directing nurses and teachers to specific service providers, with the main purpose of helping them avoid tax and National Insurance. Some recruitment companies are willingly saying to nurses 'you can avoid employment income by going to this or that company'.
"These recruitment agencies will definitely be liable for debt transfer if we are unable to recover debts from those intermediaries.
"We will be looking at this. HMRC compliance staff will be looking at those service providers who are highest risk," he warned.
Wythes later told Recruiter of a new type of intermediary, primarily in the construction industry that has arisen since the MSC legislation came into force. Wythes said these intermediaries were telling workers that they still enjoyed self-employed status, and paying them accordingly. He said the intermediaries were also claiming they were outside the legislation.
Wythes said that each case needed to be looked at individually, but where the worker turned out to be an MSC, recruiters could potentially be caught by debt transfer. He said he knew of three such intermediaries — a number that he believed could grow.
Anne Fairweather, head of public policy at the Recruitment and Employment Confederation, described Wythes' comments as "allegations". However, she told Recruiter: "Now that third party debt has come in, agencies need to be sure what they are doing when recommending service providers to contractors.
"There's a reasonable amount of confusion in the market. Agencies need to be sure what they are dealing with. If it's a PAYE umbrella it should be fine; if it's more complex, then maybe not."
However, Wythes warned that recruiters shouldn't assume that umbrella companies were automatically the safest solution. "You have to be careful about your definition," he said. "My definition is that all the income is employed income. The other thing is that there is an employment relationship. If these two conditions exist, then recruiters are not caught."
Wythes said that HMRC expected to publish an audit standard in mid-February. However, due to HMRC's legal concerns, there would be no accreditation scheme.
Robin Wythes, HMRC's head of employment status policy, told recruiters at a seminar in London, organised by JSA chartered accountants: "I have been told as recently as two days ago of agencies directing nurses and teachers to specific service providers, with the main purpose of helping them avoid tax and National Insurance. Some recruitment companies are willingly saying to nurses 'you can avoid employment income by going to this or that company'.
"These recruitment agencies will definitely be liable for debt transfer if we are unable to recover debts from those intermediaries.
"We will be looking at this. HMRC compliance staff will be looking at those service providers who are highest risk," he warned.
Wythes later told Recruiter of a new type of intermediary, primarily in the construction industry that has arisen since the MSC legislation came into force. Wythes said these intermediaries were telling workers that they still enjoyed self-employed status, and paying them accordingly. He said the intermediaries were also claiming they were outside the legislation.
Wythes said that each case needed to be looked at individually, but where the worker turned out to be an MSC, recruiters could potentially be caught by debt transfer. He said he knew of three such intermediaries — a number that he believed could grow.
Anne Fairweather, head of public policy at the Recruitment and Employment Confederation, described Wythes' comments as "allegations". However, she told Recruiter: "Now that third party debt has come in, agencies need to be sure what they are doing when recommending service providers to contractors.
"There's a reasonable amount of confusion in the market. Agencies need to be sure what they are dealing with. If it's a PAYE umbrella it should be fine; if it's more complex, then maybe not."
However, Wythes warned that recruiters shouldn't assume that umbrella companies were automatically the safest solution. "You have to be careful about your definition," he said. "My definition is that all the income is employed income. The other thing is that there is an employment relationship. If these two conditions exist, then recruiters are not caught."
Wythes said that HMRC expected to publish an audit standard in mid-February. However, due to HMRC's legal concerns, there would be no accreditation scheme.
