HMRC announcement on pay day tax relief could damage recruitment supply

HMRC’s latest announcement on “pay day by pay day tax relief models” may have unwelcome connotations for the recruitment industry, and could lead to wages inflation according to the Association of Recruitment Consultancies (ARC).

HMRC’s announcement is targeted at umbrella companies, employment businesses, labour providers and temporary workers, and addresses tax relief on expenses. This targeting raises some concerns for recruitment consultancies supplying temporary workers and contractors.

Ben Grover, external policy adviser to ARC, explained: “Provided the HMRC announcement is simply highlighting a specific tax issue for temporary agency workers, we see no problem. However to the extent that it goes beyond this, perhaps as part of a move against allowing expenses for temporary workers, and we have noted that all employers of temporary workers are singled out, we would be concerned. ITEPA 2003 makes no distinction between types of employer and there should be a level playing field for all.

“Any move by HMRC to treat employers of temps differently, perhaps by imposing different rules for obtaining dispensations, could have ramifications for the temp supply industry as a whole given that the result could be to force down the temps net pay wherever they are employed and necessarily incur expenses. This in turn could drive demand for higher wages to compensate, and may make temp workers less attractive to engage. Further, imposing bars on payment of expenses would interfere with the ability for a temp worker to travel from one place to another, often essential for temp work and for retaining flexibility in the workforce.”

ARC’s key objective is to promote the recruitment industry. It is therefore writing to HMRC to address these concerns and to establish so far as possible HMRC’s objectives for the temp and contractor supply industry in the long term.