In the wake of the Independent Appeals Tribunal ruling to uphold the GLA’s revocation of the licence of FS Commercial (FSC) because it operates a particular tax scheme for its workers, it is important to keep an eye on the big picture, says the Association of Recruitment Consultancies (ARC).
The GLA case related to a ‘pay day by pay day’ scheme (PD scheme) apparently operated by FSC on advice from an employment tax specialist and which appears to have infringed GLA standards. Those standards include the obligation to deduct proper levels of PAYE and NICs from workers’ pay. In allowing expenses against gross pay the suggestion is that incorrect levels of PAYE and NICs were being applied..
Earlier this year HMRC made clear its position on PD schemes and those running such schemes could therefore face an HMRC investigation and liabilities for unpaid levels of PAYE and NICs. It is crucial to note that PD schemes differ from other employer (umbrella) expenses arrangements. This case therefore serves as a warning to those who also operate PD schemes.
All the same, whilst it is always important to check that any scheme being operated is legal, the overriding question is whether expenses for temp workers should be allowed at all.
Adrian Marlowe, Chairman of the ARC, said “the ability to pay properly incurred expenses remains at the heart of temp supply and flexibility of the workforce in the UK, particularly at the lower end of the pay spectrum. Let’s face it, not many temps will be willing to travel significant distances each day if the travel costs renders the benefit near worthless. There is a danger that a wider attack on so called tax avoidance in this area could damage the model, as confidence is likely to become undermined. Fortunately, so far this has not happened.”
“The reality is that hirers want best rates, agencies try to facilitate best rates, and workers want best net pay, so it is not surprising that where legitimate ‘tax free’ expenses are incurred they are factored in to achieve that shared objective. Current tax law unambiguously recognises this for employees working at a temporary place of work, and the model helps drive growth and employment in the UK. HMRC, and indeed GLA, energy should therefore be targeted onto those areas where there is a genuine cause for concern, for example where tax law obviously is not being properly applied, as appears to be the position in the recent GLA action. Any alternative approach would be unhelpful as it is hard to see that there is any justifiable case that expenses arrangements per se amount to ‘immoral’ tax avoidance.”
This article is reproduced from an article on www.arc-org.net