Its International stresses recruiters need to be clear on rules for reporting placements to HMRC
Central to the UK government’s programme for combating ‘false self-employment’ is the requirement for every recruitment business to submit to HMRC a record of all ‘contract and temporary workers’ who are not paid through its own PAYE scheme. This is according to Its International, which says that not every recruiter is aware HMRC expects the quarterly online returns to include overseas placements on fixed-term assignments.
Mike Phillips, marketing director of ItsInternational, said, “If you place someone who is subject to UK tax on a fixed-term assignment outside the UK and he or she remains UK tax resident for that contract period, that placement must be included on your list. For example, let us assume a UK individual is contracted by you to work full-time in Germany for 12 months starting 1st February 2016 and ending 31st January 2017. Not only does your placement remain UK tax resident throughout but he or she has also become tax resident in Germany and has to file tax returns in two countries. Your placement is on the radar of two tax authorities. Please remember only contracted periods are to be considered, not assurances of contract extensions. The placement is not included on your list once he is no longer UK tax resident. The question is how would you know?”
Phillips believes this opens a potential hornet’s nest for recruiters. He asks, “What processes are you using to verify a placement’s residence status for UK tax? How do you tell if your placement is an expatriate British citizen or, indeed, another nationality who previously lived and worked in the UK? Importantly, how does HMRC expect you to approach the question of a placement’s residency status when you are placing them outside the UK?”
ItsInternational say that if and when HMRC audit quarterly returns, its focus of attention will be on those who have listed as self-employed. Irrespective of any contract wording, it says HMRC will want to review the checks made to determine their self-employed status.
Bridget Wood, a recruitment sector lawyer at law firm Mishcon de Reya LLP, commented, "Since April 2014, when changes to the agency tax legislation came into force, HMRC treats the relationship between a recruitment business and any worker it engages directly to personally provide services to a client as one of employment for tax purposes, unless it can be shown that the manner in which the worker provides the services is not subject to (or to the right of) supervision, direction or control by any person. This presumption of supervision, direction or control has aided the government's attack on 'false self-employment’ and is likely to be used in amendments to other tax legislation which affects the recruitment industry."