In a hard hitting seminar held in London yesterday by the recruitment law specialist Lawspeed, attendees were warned of the risks in dealing with tax avoidance schemes through payroll companies.
Theresa Mimnagh, an associate director, explained “there has been little mention since the rules were introduced of any investigations under the MSC legislation, but we now understand that behind the scenes there is some real activity by HMRC. All payroll and umbrella companies say that they are compliant with HMRC rules yet some are not, and it is easy for agencies to become unwittingly involved thereby exposing themselves to risk under HMRC’s crackdown.”
The seminar which reviewed the tax legislation relating to contractors (IR35) and umbrella payroll companies (expenses allowances and MSC) as well as recent government consultations, follows a year of government rhetoric over tax avoidance. It also was delivered closely on the heels of two Radio5 Live investigations which focused on expenses schemes and offshore arrangements, highlighting a public concern in this area.
Shawn Healy, a tax director of the international accountants BDO, speaking at the event, said “the days of a laid back approach to tax schemes are over for the recruitment industry. It is more important than ever for agencies to ensure that they get the right advice when looking at any arrangement that results in higher net pay for workers. There are some perfectly legal arrangements, but there are others that can leave agencies and hirers exposed to risk of an HMRC investigation, and that risk is becoming more real every day as HMRC ramps up its use of existing legislation to close the tax gap”.
Adrian Marlowe, Managing Director of Lawspeed, commented “the recent exposé of an offshore tax scheme demonstrated the level of demand that there is amongst agency workers to sign up to what appear to be beneficial tax arrangements. However it is one thing for an offshore company to be operating legally itself, and it is another if UK tax laws allow HMRC to recover unpaid PAYE and NICs from the end user hirer or the supply agency. This fact is often lost in the mix of different tax jurisdictions. The reality is that HMRC has specific powers that it may use to recover unpaid levels of tax and NICs against third parties in certain circumstances. No one in their right minds should invite a tax investigation.”
Marlowe continued “The devil is always in the detail of the model concerned. Lawspeed has long offered advice in this area, including a service free to agencies to check MSC exposure for the very reason that tax debt can be attached to agency directors and hirers.”
Lawspeed will be holding a second seminar on these issues on 13th December in Manchester at the City Tower, Piccadilly Plaza. For further details click here or call 01273 236236.