UK umbrella and staffing businesses could face “a horrendous amount of administration” as a result of new anti-tax avoidance legislation that is due to be implemented in April next year, according to the head of global employment tax services at EY.

John Chaplin told Recruiter the administration involved “is out of all proportion to the tax lost”. The loss to the Exchequer is estimated at £100m annually. 

In contrast, HM Revenue & Customs has said in its impact statement that the legislation will have “a small increase in the administrative burden” on businesses.

The legislation aims to close a loophole through which offshore employment intermediaries are able to avoid deducting PAYE and National Insurance Contributions (NICs) pay from UK-based workers because technically they are employed outside the UK. 

Chaplin said proving compliance will cause administrative difficulties for agencies and umbrella service providers. In addition, agencies will have to know whether any of their workers are engaged via offshore intermediaries, he said. Where an offshore provider is involved, the agency will be responsible for filing a quarterly return. 

Colin Cottell