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Scots tax powers a ticking time-bomb for staffing firms

Andy Gunson, finance director at contractor and recruiter services group Optionis, said agencies employing contractors and temporary workers on a PAYE basis north of the border face an administrative headache when the changes take effect. 

The former Gap Personnel director’s warning came ahead of the publication of the UK government’s draft Scotland Bill on Thursday. 

He said, “Giving Holyrood the power to set income tax rates and bands will create significant administrative challenges for staffing firms that pay contingent workers directly through a PAYE scheme.

“We won’t see the detail until the Bill is published, but it seems clear that the new income tax rate will be paid by people whose main residence is in Scotland.

“It’s possible that there will be a & lsquo;day counter’ to supplement this, ie that someone who lives on the English side of the border but works in Scotland will pay the Scottish rate.

“Agencies that place contractors and temps in Scotland will need to get to grips with the formula that dictates how this status is determined. Those with large numbers of contingent workers based in the borderlands will be particularly badly hit.”

Optionis, the parent group of professional umbrella employer Parasol and contractor accountancy firm ClearSky, has set up an internal project team to prepare for the changes. 

The team will be tasked with implementing updates to the group’s payroll and billing systems.  

Gunson added, “Staffing firms may well be forced to invest in new payroll software and systems in order to comply with the new regime, which would impact their profitability. 

“After AWR, pensions auto-enrolment and other legislation, these changes will make the business of employing and paying contingent workers even more complex.

“Staffing firms could be compelled to seek alternatives to the traditional PAYE scheme, such as outsourcing employment of workers to third-party providers.”

 

 

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