Government announces yet more measures – this time

The Government has today issued a new consultation – entitled “Tax relief for travel expenses: temporary workers and overarching employment contracts”. This marks the beginning of another phase in the government’s review of the agency sector. Clearly the principle, that agency workers are able, by operating through an umbrella company or agency, in either case using an overarching employment contract, to claim tax relief against travel expenses, is one that the Government would like to end. The principle is said to have been abused by both agencies and umbrellas with the consequence that the Exchequer has lost money. In addition it is argued that eligibility for tax relief for travel to and from work, which regular employees cannot set off against tax, gives agency workers an unfair advantage. However the Government indicates a need to balance a curtailment of the relief against the possibility that its removal could damage flexibility…

Agency Workers Directive – sleepwalk to disaster?

The Agency Workers Directive (AWD) has long been simmering in the background, with many believing it would never become law, especially since the Government was originally against the proposals. However, following another policy U-turn, the Government announced on the 20th May that a deal had been made with the TUC and the CBI that would give agency workers the right to equal treatment. The details of how the deal was reached were, to say the least, a little sketchy. On the 9th June the EU Council discussed the AWD proposal, with the UK now supporting the Directive. Notably on the same day the UK secured the retention of the opt-out from the 48 hour working week under the Working Time Directive, which had been under threat. This appears to be another deal behind closed doors. The BERR website states “The Government hopes that EU agreement will be obtained in time…

EU Council reaches agreement on principles of Agency Workers Directive

On the 10th June, the EU Council  agreed points of principle as to the content of the proposed Agency Workers Directive. Fundamentally it was agreed that the entitlement for agency workers to have comparable rights to regular employees of the end user shall apply from day one of an assignment in terms of pay, leave and maternity leave. However it was also agreed that member states can derogate from this period, by allowing a longer qualifying period and no upper limit was set for that qualifying period. Additional points agreed include (a)    temporary agency workers to be informed about permanent employment opportunities in the user enterprise (b)    equal access to collective facilities (canteen, child care facilities, transport service) (c)    Member States have to improve temporary agency workers access to training and child care facilities in periods BETWEEN their assignments so to increase their employability (d)    Member States have to ensure penalties for non-compliance by…

Agency Workers to get Employment Rights

Following our newsletter of 16th May 2008 the government has announced that it has agreed a deal with unions and employers that will see agency workers receiving equal treatment as employees. Equal treatment will mean the same entitlement to pay and basic working and employment conditions. The entitlement will arise after 12 weeks “in a given job”. The employers organisation that has “agreed” this deal is the CBI which has commented “There has been a major risk of damaging legislation coming from Brussels, and the CBI has judged that the government’s proposals represent the least worst outcome available for British business. Half of agency assignments will be unaffected as they last less than 12 weeks – protecting businesses’ ability to deal with peaks and troughs in demand and shorter-term staff absences. And while pay is covered, occupational benefits that recognise the long-term relationship permanent staff have with an employer, like…

Changes to Conduct Regulations & Agency Standards Enforcement

It is worth the reminder that there were two related BERR consultations in 2007 on “… measures to protect vulnerable agency workers” and “…National Minimum Wage and Employment Agency Standards Enforcement”. Following responses to the consultations, the proposed legislation was finalised and will take effect in two stages during 2008. The Conduct of Employment Agencies and Employment Businesses (Amendment) Regulations 2007. These regulations amend the Conduct of Employment Agencies and Employment Businesses Regulations 2003 (“Conduct Regulations”) and introduce new provisions that are intended to better protect agency workers with effect from 6th April this year. Key changes are: Regulation 5: Where a worker decides to take up services from an agency, for example, accommodation or transport, the worker will be given a right of withdrawal from all services subject to five working days notice, or ten working days for accommodation. Regulation 21: Amendments to procedures when passing information between the client…

Case partially clarifies agency worker employment status

For many years there has been a lack of clarity as to whether an agency could have employment rights as against a hirer. More technically minded readers will know that the ruling in Dacas (2004) first really set the cat amongst the pigeons, when the Court of Appeal implied that an agency worker could be an employee under an implied (e.g. unwritten) contract. Dacas was rapidly supported by a further Court of Appeal ruling in Cable and Wireless – v- Bushaway (2005). The result was that every Employment Tribunal thereafter felt obliged to consider in every agency worker case where unfair dismissal or redundancy was claimed whether there was an implied employment contract. Bad news for recruiters supplying workers because end users rapidly became paranoid (and rightly so). Now however in the appeal hearing of James v Greenwich the Court of Appeal has clarified its position. Agency workers will not…

Who could be an MSCP?

In April 2007 the government introduced legislation to force contractors to pay employment taxes where the contractor obtains advice from managed service company providers (MSCPs). In some circumstances, this debt could be transferred to the MSCP. For an organisation to be an MSCP all that is required is for it to be in the business of promoting or facilitating the use of companies by contractors, which could catch out some agencies. For the legislation to apply the MSCP has to be “involved” with the contractor company. Being “involved” is defined to include, amongst other things, being in receipt of ongoing payments, or promoting any scheme for making good tax losses, for example tax indemnities or insurance. A contractor company caught by these rules is known as a managed service company (MSC). The legislation as currently drafted therefore exposes any company to risk of having to pay MSC employment taxes if…

HMRC Drops MSC Audit Scheme

Following representations put forward by Lawspeed, HMRC and the Treasury has abandoned the idea of introducing an audit scheme in the foreseeable future. In recent months HMRC had announced that it was considering a scheme which may allow for certain third parties to assess whether a provider organisation is compliant with the MSC legislation. However it had held back from making a quick decision despite pressure from various quarters to do so. In announcing its decision not to proceed for now, HMRC has said that it will discuss the impact with external stakeholders. Adrian Marlowe of Lawspeed said “This is a tremendous result both for umbrella companies and recruitment agencies. So far as umbrellas are concerned there were elements of the scheme that appeared to give an advantage to various providers in an unfair, and, some would say, unnecessary way. Also there were serious questions about the legality of any…

HMRC has clarified its current position in relation to the MSC legislation, but some questions remain.

At Lawspeed’s fully attended one day conference held on 11th October 2007, Robin Wythes, of HMRC and responsible for MSC legislation, indicated that HMRC recognises the difficulties that employment businesses have in identifying whether a contractor is operating through an MSC.  In order to reduce concerns over debt transfer he said that an MSC tax and NICs debt would not be transferred to an employment business if the individual worker providing the work services through an MSC was already operating through a limited company at the time he/she first approached the employment business. This is because in those circumstances it could not be said that the employment business had either encouraged or been actively involved in the individual providing their services through the particular company. Adrian Marlowe, Managing Director of Lawspeed, said “this clarification of  HMRC policy was warmly welcomed by all attending our conference and it is an enormously helpful…

Confusion reigns over MSC approval schemes – or does it?

Accreditation scheme For some months there has been speculation that an accreditation scheme, whereby HMRC will exclude certain organisations that are accredited from the scope of the MSC legislation, is under consideration by HMRC. Whilst this may be in the interests of those organisations that operate as centralised “accountancy” service providers  to workers provided via limited companies, the idea has always been open to question. Within the legislation the government is empowered to exclude certain types of organisation by order. On the face of it, to exclude centralised service providers that otherwise would be classed as Managed Service Company Providers would appear to be out of the question as defeating the objective of the legislation. Therefore there would need to be some approval method by which such organisations would become accredited – perhaps by accepting that advice given and services offered are in line with tax legislation.   HMRC has…