New Scottish tax powers will cause headaches for recruitment industry
19 February 2015
Giving Scotland the power to set its own income tax and tax bands will cause an “administrative headache” for contractors, umbrella companies and recruiters, according to contractor organisations.
Thu, 19 Feb 2015
Giving Scotland the power to set its own income tax and tax bands will cause an “administrative headache” for contractors, umbrella companies and recruiters, according to contractor organisations.
Draft legislation drawn up following September’s independence referendum to give the Scottish parliament more powers includes the option for the devolved nation to set its own income tax rates and the thresholds at which these are paid.
If Scotland chooses to implement a different tax system, umbrella companies, contractors and contingency recruiters would all face an administrative nightmare, those in the industry say.
Contractor and recruiter services group Optionis’s financial director Andy Gunson told Recruiter the changes would cause an “administrative headache”.
“It increases the burden and complexity on employers, particularly in recruitment and the contingent workforce where you already have the burden of AWR [Agency Worker Regulations] and pensions [auto enrolment],” he says.
While it is not yet clear how a new tax system will be applied, Gunson says it seems any new rate would be applied to people who reside in Scotland, but it may be possible that people who reside in England and commute to Scotland for work would also pay the Scottish rate.
Freelancer and Contractor Services Association (FCSA) chief executive Julia Kermode told Recruiter a different tax rate could also affect where contractors want to work. Scottish contracts may become more appealing than English ones, for example, she said: “Ultimately, it will affect the competitiveness between Scotland and England.”
She said there were a lot of questions still to be answered, including when someone is considered to be a resident in a country for tax purposes. If an English resident takes a temporary six or seven-month contract in Scotland, for example, she asked, would they be considered an English or Scottish resident for tax purposes?
“At the moment, we’re still dealing with quite a lot of the unknown and what I know will happen is umbrellas will take responsibility for organising [different tax codes] … so [there will be] a huge affect on umbrellas; it will make things a lot more complicated.
“Theoretically being able to vary tax rates is fine for a devolved nation but it will cause a headache.”
Gunson said Optionis had set up an internal project team to prepare for the changes and added “staffing firms may well be forced to invest in new payroll software and systems in order to comply with the new regime”.
Any changes to the Scottish tax system will come into effect in April 2016.
Giving Scotland the power to set its own income tax and tax bands will cause an “administrative headache” for contractors, umbrella companies and recruiters, according to contractor organisations.
Draft legislation drawn up following September’s independence referendum to give the Scottish parliament more powers includes the option for the devolved nation to set its own income tax rates and the thresholds at which these are paid.
If Scotland chooses to implement a different tax system, umbrella companies, contractors and contingency recruiters would all face an administrative nightmare, those in the industry say.
Contractor and recruiter services group Optionis’s financial director Andy Gunson told Recruiter the changes would cause an “administrative headache”.
“It increases the burden and complexity on employers, particularly in recruitment and the contingent workforce where you already have the burden of AWR [Agency Worker Regulations] and pensions [auto enrolment],” he says.
While it is not yet clear how a new tax system will be applied, Gunson says it seems any new rate would be applied to people who reside in Scotland, but it may be possible that people who reside in England and commute to Scotland for work would also pay the Scottish rate.
Freelancer and Contractor Services Association (FCSA) chief executive Julia Kermode told Recruiter a different tax rate could also affect where contractors want to work. Scottish contracts may become more appealing than English ones, for example, she said: “Ultimately, it will affect the competitiveness between Scotland and England.”
She said there were a lot of questions still to be answered, including when someone is considered to be a resident in a country for tax purposes. If an English resident takes a temporary six or seven-month contract in Scotland, for example, she asked, would they be considered an English or Scottish resident for tax purposes?
“At the moment, we’re still dealing with quite a lot of the unknown and what I know will happen is umbrellas will take responsibility for organising [different tax codes] … so [there will be] a huge affect on umbrellas; it will make things a lot more complicated.
“Theoretically being able to vary tax rates is fine for a devolved nation but it will cause a headache.”
Gunson said Optionis had set up an internal project team to prepare for the changes and added “staffing firms may well be forced to invest in new payroll software and systems in order to comply with the new regime”.
Any changes to the Scottish tax system will come into effect in April 2016.
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