What all recruiters need to know

The new HMRC legislation on temporary workers looks like it will have major implications for employment and recruitment agencies. As of April 6th, all temporary workers who are providing services under supervision, direction and control must be on payroll. As a result, they will be liable for employee NICs and tax, which must be deducted at source. Furthermore, employment agencies are now regarded as employers for NIC purposes, at 13.8%. If tax is not deducted at source, it becomes the responsibility of the recruitment agency and will be regarded as their legal debt. If agencies take on workers who are not on payroll, they will have to demonstrate to HMRC why they’ve done so. If they have engaged a worker via an Umbrella or Personal Services Company, then it’s vital they understand the nature of the Umbrella Company in order to avoid tax liability. To be sure that they are in the clear, the agency should establish that the Umbrella Company is based in the UK and compliant with UK tax regulations. They should also ensure that all workers engaged through this company have full employment status and rights, and that they are not given alternative options such as self-employment, which will leave the agency possibly liable for tax and NICs. Essentially, the Umbrella Company must be a PAYE Umbrella Service and nothing more, and should show timely, accurate RTI submissions for all employees. Agencies need to be confident that PSC workers can prove they are in business of their own volition and legitimately working through a limited company. It’s vital they get to know their service providers and have a relationship with them based on trust and transparency. This should also extend to the entire employment supply chain, and any dubious providers should be culled from the supplier list if there is doubt as to whether they meet the above criteria.

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