Government issues guidance for recruiters using umbrella firms to pay workers
The government has this week published guidance for recruitment agencies using umbrella companies to pay temporary or contract workers.
The guidance includes warnings to not agree to or accept gifts that encourage any improprieties within the supply chain or reward past improprieties.
The guidance also advises agencies that they must report and pay tax and National Insurance contributions on any incentives or rewards received from the umbrella company by employees or the recruitment agency including, for instance, the particular umbrella company on a preferred supplier list.
In related action this week, the government has today unveiled a new self-help online tool in beta form for umbrella company employees and employment businesses who work with umbrella companies to estimate take-home pay and see deductions. It comes after confirmation in the budget that umbrella workers and employment firms need better support to understand their tax position.
The tool is available on GOV.UK on this page.
Commenting on the launch of the checker, Crawford Temple, CEO of Professional Passport, an independent assessor of payment intermediary compliance said: “We understand that this is the first stage in the tool’s development with further updates likely.
“The levels of non-compliance are at an all-time high in the industry and let’s hope that this new checker will be a useful addition to HMRC’s armoury to raise standards and compliance. Visible enforcement still needs to be stepped up and I would also like to remind HMRC to utilise the data it already holds in the form of Real Time Information (RTI) and Employment Intermediary Reporting; both systems provide two stark examples of regulatory futility that HMRC fails to tap into.”
While the guidance to recruitment agencies emphasises that umbrella companies used to employ workers are responsible for paying the worker’s wages and operating PAYE as part of their payroll, the recruitment agency also has significant responsibilities such as preventing illegal working, explaining to workers how the umbrella arrangement will work and any other arrangements that may be available to them. Agencies are also told to be clear about pay rates.
For instance, the guidance says: “You should be clear that the assignment rate is the rate that you will pay the umbrella company, not the worker, and the worker’s gross pay will be less than the assignment rate.”
Further, agencies are warned about penalties of working with non-compliant umbrella companies.
“In most circumstances, claiming that you were not aware of non-compliance is not a defence,” the guidance says. “If HMRC investigates and finds you are involved in non-compliant supply chains, we may take action. This could include, but is not limited to:
- Prosecuting you for failure to prevent criminal facilitation of tax evasion in the supply chain.
- Denying your right to recover VAT input tax and issuing penalties if you knew (or should have known) you were connected to VAT fraud.
- Issuing an enabler’s penalty if you: use an umbrella company that is operating tax avoidance or have been involved in designing, marketing or facilitating another person to avoid tax.”
The full guidance can be found here.
• Comment below on this story. Or let us know what you think by emailing us at [email protected] or tweet us to tell us your thoughts or share this story with a friend.
