HMRC has now published their response to the consultation on false self employment, which closed in early February. There are a number of key factors that agency partners of ICS need to consider and in particular the new guidance notes that accompany their response surrounding Supervision, Direction and Control.
Key issues
- The new legislation will come into effect on the 6th April 2014. This will include legislation surrounding returns, record keeping and penalties.
- HMRC have delayed the reporting requirements to develop and test the new systems fully. The first quarterly return will now be due on the 5th August 2015. Full compliance will still be required from 6th April 2014 – we would expect HMRC to consider any issues retrospectively back to the 6th April 2014.
- PSC’s will fall outside the scope of the legislation, however HMRC will not tolerate avoidance by migration to PSC’s and will be introducing anti avoidance legislation on 6th April 2014. HMRC has stated that it will be looking at a reduced reporting requirement for PSC’s following responses to its consultation. Genuine use of PSC’s should be unaffected and remain subject to IR35 legislation.
- “The Control Test” – HMRC have provided detailed guidance and examples regarding Supervision, Direction and Control – Agencies must ensure that this is considered for each assignment.
- Liability – This rests firmly with the Employment Agency and may only be transferred to the end client where it is proved that the agency has been given false information.
What does this mean in practice?
- Employment agencies will need to consider whether Supervision, Direction and Control exists in respect of each temporary assignment undertaken by a contractor.
- A decision on how the contractor is paid should be based on this review.
- Alternatively an Employment Agency may decide that it would like all of its temporary workers paid via an Umbrella or PSC model (where the individual is genuinely self employed) to reduce risk and streamline processes.
- Mass migration of individuals affected to PSC’s is likely to fail and result in liability for Agencies further down the line as HMRC will introduce anti avoidance legislation.
- We see a significant impact on current CIS and Sole Trader pay models.
How can ICS help?
- Established in 2002, we work in partnership with recruitment agencies providing a full range of accountancy and payroll services to contractors and freelancers throughout the UK.
- It is our job to take compliance seriously and we have tailored our services over the past twelve years to ensure that we remain compliant. We retain one of the big four accountancy firms to advise us, ensuring that we are always on top of any legislative changes.
- HMRC appears to indicate within the documents that it sees the Umbrella payroll model as an effective mechanism and we operate a compliant solution via ICS Umbrella Limited.
- Our PSC model, starts from £90 per month and insurances are included.
For our recruitment partners, we are a first point of contact for advice on legislation that may impact them and have been preparing for these amendments since they were announced in the Autumn Statement.
We are happy to discuss the impact of this new legislation with our agency partners to ensure that we collectively remain compliant. Please call us on 0800 195 3750 or email info@icsuk.com.
If you’d like a copy of HMRC’s Summary of Responses and Supervision, Direction and Control Guidance please email webenquiry@icsuk.com.
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