Following the enforcement of the new “false self-employment” legislation, recruitment agencies and umbrella companies are doubling their efforts to ensure compliance with the new rules. Adapting to the changes and getting everything right will probably take a while but tax experts are lending a hand by exploring the new provisions in depth and providing advice to the recruitment industry. According to legal firm Lawspeed, which specialises in employment law, recruitment agencies that pay their contractors gross are put at risk by the new legislation.
agencies with direct contracting arrangements have to make PAYE payments.
As Lawspeed managing director Adrian Marlowe explains, agencies with direct contracting arrangements have to make PAYE payments. In light of that, they need to be very thorough when ascertaining if the people they supply get paid gross by any employment intermediaries involved in the recruitment process. Diligence is especially important for construction industry operators since the CIS tax scheme has made gross payments a common practice. The law does not give agencies any leeway to postpone, meaning that those failing to address the issue promptly are at greatest risk of being liable to HMRC for back payments, Marlowe notes.
The new rules are included in the Finance Bill 2014 and introduce changes to agency tax legislation. The provisions require the application of PAYE and employers NICs to worker payments unless the individual is shown to be free from any supervision, direction or control by another person. All intermediaries are subject to this requirement, including personal service companies. In order to promote compliance, HMRC will hold recruitment company directors personally liable for debts owed by their firm. However, the new legislation does not apply in cases when an individual has received payments for services rendered by way of employment income.