REC welcomes new HMRC Brief
The Recruitment and Employment Confederation has welcomed the publication by HMRC of a Business Brief on the application of tax/NI and National Minimum Wage legislation to the supply of temporary workers.
This follows the REC's recent calls for Government to provide some clarity on one of the main areas of concern for members flagged up during the recent 'REC on the Road' events.
The Brief highlights the growth in arrangements described as "Travel and subsistence schemes" or "Mobile Worker schemes". It points out that whilst workers may benefit from some saving in tax and NI contributions "the major saving is not to the worker, rather to the party who would bear the higher employer's NI contributions costs if it were not for the arrangement".
Concerns highlighted by HMRC mirror those reported by a number of members and include:
Potentially ineffective overarching employment contracts
Dispensations (granted by HMRC) which are invalid or which have been wrongly applied
"Expense payments" made tax free without that level of expense, or in many cases any expense having been incurred
Breaches of the National Minimum Wage
Investigations conducted by HMRC suggest that many workers in low paid sectors do not understand the arrangements and in some cases have little choice as to whether they are paid through such schemes.
The HMRC warns that it will investigate and challenge non-compliant employment businesses and/or umbrella companies which do not fully comply with their statutory obligations.
End user businesses are referred to a leaflet giving guidance on due diligence for those dealing with labour providers to ensure the integrity of all those in the supply chain. They also encourage those who have concerns about another business to provide details in confidence to HMRC providing a link to their website for this purpose.
Commenting on the significance and practical implications of the HMRC Brief, Fiona Coombe, the RECs Director of Professional Services says: "One of the REC's core functions is to take forward areas of concern or uncertainty on behalf of our members and to get answers from the highest levels of Government. It is pleasing to receive a prompt response on what has been a major source of uncertainty for agencies and recruitment professionals across the country.
"We will be encouraging our members to carry out due diligence on both other labour providers and clients before entering into a supply chain to ensure their reputation is not challenged and to avoid the time and expense involved in dealing with an investigation by HMRC. It is also recommended to take expert tax advice in relation to the application of any arrangements already in existence to ensure they are being correctly applied.