Are your tax compliance processes your weakest link?
In this country we have the belief, encouraged by successive administrations, that it’s ok to be self employed or work via a company. After all, you can buy a company off the shelf at the click of a few buttons for less than £25. Once set up you are entitled to a host of business tax reliefs whilst at the same time saving anyone you work for the trouble of paying out employer NICs. What could be better?
As Uber and Deliveroo well know, taking advantage of this is not plain sailing given the plethora of employment, worker and tax laws that now exist. As mentioned in our previous article on 17th June “When it comes to tax – can you trust what you’re being told?”, a reliance on an interpretation should only go so far, basing your business on it is entirely another thing. So what should businesses do to check that all is as it should be when dealing with third parties who payroll their workers?
The rationale for using a payroll provider/umbrella/accountancy provider in the first place will always remain sound – save the cost of running your own PAYE, avoid employment rights, save employer NICs. But what about the other side of the coin? Handing your money to a party who promises to pay your worker but who may fail to account for it, who may fail to provide promised benefits, who may expose you to worker or employment claims or, who may break tax laws that leave you liable to pay out from your hard earned profits.
Should you rely on the word of that payroll provider?
Having a contract is fine but surely making some basic checks would make sense first, and would it not be a good starting point to ensure that your checks are undertaken by someone the payroll provider is not funding?
Given HMRC’s ongoing focus on tax avoidance in the worker supply industry it is critical that agencies and hirers using temporary workers or contractors know their onions. Having a clear policy to check credentials and activities of any third party payroll or accountancy provider has to be a core requirement if you want to avoid the risk of getting caught up in a tax investigation. Nothing can be better than properly conducted independent advice or audit. With no conflict of interest to skew the outcome and professional indemnity insurance on tap in case of a claim, this must make sense. So instead of reliance on trade membership as the justification for dealing with a particular business, build in a robust process to satisfy yourself that all is as it should be.
The old adage ‘a chain is only as strong as its weakest link’ springs to mind. Where everything else is lined up securely for you to profit from the business, you may find that the weakest link is your payroll arrangement, with penalties arising down the line. Little can compare with getting a professional third party in at an early stage to check whether the chain can take the strain.
Adrian, a highly experienced lawyer, founded Lawspeed in 1997. He is responsible for developing our extensive portfolio of products and services, including the widely used Lawspeed contract templates. Adrian is an expert on “recruitment law” and specialises in contracts, regulatory compliance, employment status and dispute handling. He is chair of the trade body the Association of Recruitment Consultancies, the only lawyer lead recruitment trade body in the UK. Adrian and his co-director Ravi devised Standards in Recruitment as a vehicle for helping drive up standards and compliance in the industry.
Adrian is our lead in discussions with the government over regulatory evolution. Apart from assisting with client support, Adrian’s primary role is research and development into methods of business delivery, our latest service Proterms being his most recent project. Adrian heads our IR35 lawyers team.