Contractor service providers are starting to feel the heat from HMRC enforcement.

Tuesday 23 April 2013

The past few months have seen a number of contractor services businesses being targeted by HMRC enforcement action. Most recently, an article published by Recruiter reported that Legitas has decided to process all its temporary workers through PAYE with immediate effect, after recent discussions with HMRC.

Details have not yet been released regarding the nature of any non-compliance, but the issues arose during "recently commenced talks" with HMRC, according to Recruiter. The report described HMRC's concerns regarding the vague "operational practicalities of our current model".

This is not the only recent example of a company providing services to contractors and temporary workers that is making changes.  It was reported that Paymaster withdrew its Pay Day umbrella product last year and FS Commercial also withdrew its proposed ‘pay-day’ scheme following a judicial decision.  It has also been reported that HMRC has issued debt transfer notices to the i4 Group, the group behind Costelloe Business Services. These instances appear to show HMRC taking firm action on both travel and subsistence schemes and in relation to Managed Service Providers (under the MSC legislation).

This enforcement activity by HMRC has got to be welcomed. It is absolutely essential if the service providers’ marketplace is to be steered towards acceptable compliance standards. 

“This news is a stark reminder to hirers, recruitment agencies and temporary workers of the risks of working with the wrong service provider – whether that's an umbrella company, a CIS business or an accountancy services provider," says Martin Hesketh, Brookson managing director and a founding member of FCSA.

"Everybody claims to be compliant and clearly everyone isn’t.  Individuals and organisations need to find appropriate ways to due diligence their suppliers.”

Organisations such as the FCSA are important for upholding ‘due diligence’ and are clearly focused on driving best practice across the industry.

Companies wishing to join the association are expected to sign up to its code of ethics and must satisfy its industry-leading code of conduct on an annual basis. An independent review by one of the ‘Big 4’ accountancy practices is essential and all review documentation must be voluntarily submitted to HMRC.  This approach sets the standard for professional compliance which all members must continue to adhere to.

This process ensures that hirers, recruitment agencies, freelancers and contractors alike can work with an FCSA member confident in the company's financial security and professional and technical compliance. They can be secure in the knowledge that their business activities will not be disrupted or put at risk by the kind of problems faced by so many other firms.

“At a time when contractors and freelance workers are seeing their tax arrangements scrutinised more and more closely, it really does pay to work with specialist professional service providers in whom you can have complete confidence,” added Mr Hesketh.


By Victoria McDonnell

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