Legitas switches temps to PAYE after ‘concerns’

Provider of services to temporary and contract workers Legitas has decided to process all its temps through PAYE, with immediate effect.

Thu, 18 Apr 2013

Provider of services to temporary and contract workers Legitas has decided to process all its temps through PAYE, with immediate effect. 

In a statement to its recruitment agency clients, chief executive officer David Allen says the company took the decision after “we identified concerns … in relation to the operational practicalities of our current model”. According to the statement, these concerns were identified during “recently commenced talks” with HM Revenue & Customs (HMRC).

According to its website, yet to be updated since the announcement, among the services Legitas offers is an outsourced payroll service for recruitment agencies and temporary workers, which enables temporary workers to increase their net take-home pay each week by offsetting allowable expenses against tax. 

Allen says the decision, which means that tax and National Insurance will now be deducted from Legitas’s temporary workers at source, was taken “in order to best protect your interests [the recruiter’s] and those of the temp”.  

A source close to Legitas says the concerns with the company’s existing model came to light during a standard HMRC audit of the company. The source emphasises that the company has done nothing illegal. “The operational practice of the system wasn’t as tight as it could have been, and was open to error along the way. There are issues with the way the expenses are processed… because it’s down to the employee to process the forms and sometimes they don’t do it properly.” 

The Legitas statement says that the switch to processing temps on a PAYE basis will continue “for a short period of time” and it explains that this is pending the introduction of “a new and more stringent real time portal”.

“We are therefore currently working with HMRC to set the precise terms of this new model for use across our full client base,” continues the statement.  

However, when Recruiter brought the announcement to the attention of HMRC, a spokesperson told Recruiter that while “unable to comment on specific taxpayers… HMRC does not help businesses to develop models”.

Legitas is not the only company in this market making the decision to change the way it pays temps.

Last year, amid rising concerns about the use of travel and subsistence schemes, payroll and accounting services firm Backoffice withdrew its umbrella product Pay Day, operated through its subsidiary Paymaster. This followed an earlier decision by a judge not to grant a licence to one company, FS Commercial, proposing such a pay-day scheme. 

Referring to the FS Commercial decision, and before this week’s developments, Allen wrote on Legitas’s website: “We are, therefore, confident in our continued offering of our compliant products.”

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