HMRC playing a long game
After a 9 year battle, HMRC has won the first case under the MSC (managed service company) legislation: Christianuyi Ltd & Ors vs. Revenue & Customs.
The case dates back to 2007 and relates to MSC provider Costelloe Business Services Ltd (CBS), and i4.
And more to come…
The judges making the ruling (Bannan and Woodman) underlined the importance of the case when they stated: “We understand that these are the first appeals in which the MSC legislation has been considered.” The judges also pointed out that: “there are a number of other appeals concerning this legislation which are pending before the First-tier Tribunal.”
Forest managing director, Jovan Pavlicevic commented:
This shows HMRC might move slowly but it’s crucial to make sure you’re doing things right, and that your supply chain is in order. HMRC is clawing back £160,000 from 5 healthcare workers, going back over a period of 9 years. Agencies and contractors need to be certain they’re not storing up an unquantifiable future risk. When it comes to contractor payments, you can always rely on the old adage: if it sounds too good to be true….
All this points to a need for agencies to be aware, and carefully vet all suppliers. Forest is an FCA regulated firm of financial advisers and we help agencies with compliance audits as part of a free health check service. Get in touch today to learn more.
The last few years have seen a raft of changes impacting the temporary labour supply chain. Forest have worked long and hard, and invested in top level advice to ensure our approach is compliant. We’ve produced this whitepaper for our clients, to help them understand the new approach and to interpret what the new rules of the game mean. Our MD, Jovan Pavlicevic commented:
The government’s direction of travel been clear for a long time. The process of shaping the labour supply chain through legislative direction has been a bit like herding cats for HMRC, as they patch a tax system that resembles a leaking lifeboat.
However, our prediction is that this is where the market will settle now for a number of years. The rules have grown tighter, in essence removing a number of tax incentives. The result is that this April, HMRC will have achieved their goals. The marketplace is hemmed in on all sides by the likes of GAAR and TAAR, debt transfer and director’s liabilities, making it very high-risk for anyone to circumvent the rules.
To download our whitepaper, click here. To book your consultation with an expert, call us today on 0203 478 4017.
Living wage becomes law
In April 2016, the national living wage will become law. Workers aged 25 or over (and not in the first year of an apprenticeship), will be legally entitled to at least £7.20/hour. The Government is increasing this every year, so by 2020 it’ll be more than £9/hour. There are more details available for both employees and employers directly from the government here
Our MD, Jovan Pavlicevic commented:
“The increase in NMW is met every year with the same chorus. Many end clients expect recruiters to soak up the difference and insulate them from rising costs. Savvy recruiters start their communications early, to help end clients understand that increases aren’t simply profiteering but are inevitable to stay on the right side of the law. We’ll be publishing a whitepaper soon to help our agency clients communicate this more effectively to their end users”.
So here are our top tips for recruiters
1. Increase your charge rates
Four words that sound simple, but can be difficult to achieve. You know why you need to do it, but what about how?
2. Break it down
Instead of just sending a blunt email advising rates are going up by 10%, try breaking your charge rate down into digestible bites:
NMW = a
Holiday pay = b
ERNI = c
Pensions = d
Margin = e
VAT = f
Add them together to get to your charge rate – by demonstrating the working like this, you might be surprised at the reaction you get. We’re often amazed how many end user FDs scratch their heads and guess that ERNI is 8 or 9%…
3. Don’t forget your money is now worth less!
(That’s worth less… Not ‘worthless’). What we mean here is that the upward pressure at the bottom of the wage scale means your pay rate of £10/hour from 2003 (when you last increased your charge rates!) is now not cutting it in the real world. £10 buys a lot less than it did last year, so the message is that all rates need to bump up – not just those near the living wage.
4. Get your PR started early.
Speak with end users about the living wage, and start today. Get in touch with us for your free whitepaper and use it to help educate your client base – the more thorough you are now, the less headaches you’ll face in April.
5. Get your supply chain in line.
Another no-brainer, but often overlooked. Do you know how your suppliers are paying your temporary workers? Onshore, offshore, umbrella, CIS, EDM, Ltd co, loans or EBTs? There are a million options out there so educate yourself and make sure you’re aligned with best of breed suppliers and partners.
We can help you navigate the changes and maintain margin. Contact us today and join our list of happy clients!
I’m busy making a placement – give it to me in a tweet.
HMRC remove travel and subsistence expenses for #temporary workers. Recruiters need to engage with their suppliers to ensure #compliance.
I’ve got a minute between BD calls, tell me more.
The government first announced their intent to restrict travel and subsistence expenses in the 2014 Autumn statement. And we let you know about it back then. Since then there’s been much speculation, and while some of HMRC’s comms have been opaque, we’ve known the general direction of travel for a long time. Now that the draft bill is published, the stated policy objective is clear:
“The proposals are aimed at preventing workers, engaged through an employment intermediary, and their employers, from benefiting from relief for home-to-work travel expenses. It is an established principle in the UK tax system that people should not be able to claim relief on their regular commute from home-to-work, therefore this relief is not generally available to other workers.”
Compliance is key for the longevity of my contract desk, and I want to be able to inform my end-user clients. Give me the full detail.
Travel and subsistence expenses will not qualify for tax relief where the travel is “ordinary commuting” and where an intermediary is involved… Unless the worker is not subject to supervision, direction and control (or the right of). Tough new anti-avoidance measures are also in place. These include:
- Transfer of liability to the intermediary directors in the event that PAYE/NIC isn’t operated correctly
- Transfer of liability to anyone providing false documents around supervision, direction and control.
So the tone is clear – comply or be made personally liable. This, coupled with other debt-transfer measures and intermediaries reporting means that HMRC are getting serious about policing the rules.
Our MD, Jovan Pavlicevic responds to the changes:
“We launched forest at the end of 2011 in the teeth of the credit crunch, and the same month AWR went live. AWR which, of course, was the end of the world – or at least recruitment – and definitely umbrellas. Since then we’ve grown from one person to a team of over 20. Through AWR, through RTI, onshore and offshore intermediaries, intermediaries reporting, pensions and more.
Each one piled more cost in, and called into question the efficacy of temporary recruitment and more-so umbrellas… But the sectors continue to show strong growth and have played a large part in keeping the UK’s head above water through the GFC.”
Do you need to respond to the changes, retain margin, protect your and your client’s businesses, as well as keeping temps happy? Forest will help. Contact us now to book a meeting with an expert.
George Osborne has delivered his autumn statement and most of the industry press found it a damp squib. Block-busting, world-ending change was hyped for recruiters and temps following earlier unsubstantiated leaks to the Guardian… But for all of this, George uttered not one word on T&S, umbrellas or PSCs. He seems to be listening to us and IR35 may well be left alone – for now.
The devil is in the detail
A quick glance through the Blue Book gives us more detail, however.
3.20 Employment intermediaries and tax relief for travel and subsistence… the government will legislate to restrict tax relief for travel and subsistence expenses for workers engaged through an employment intermediary, such as an umbrella company or a personal service company… Relief will be restricted for individuals working through personal service companies where the intermediaries legislation applies. This change will take effect from 6 April 2016.
3.87 Disguised remuneration – The government intends to take action against those who have used or continue to use disguised remuneration schemes and who have not yet paid their fair share of tax. The government will also consider legislating in a future Finance Bill to close down any further new schemes intended to avoid tax on earned income, where necessary, with effect from 25 November 2015.
Jovan Pavlicevic, managing director of forest, responded to the autumn statement:
There are hundreds of articles and experts clamouring to be heard, with many making bold predictions about the fate of entire industries based on a couple of less-than-concrete sentences. Our advice is hold steady – don’t make any rash decisions. As more details emerge, we’ll be the first to keep you updated, but don’t go changing your business model in a hurry.
Forest launched the month AWR went live. AWR was at the time heralded as the end of temp recruitment and certainly the death of umbrellas. In the intervening four years we’ve grown from a team of one to a team of over 20, and grown through AWR, RTI, pensions, intermediaries reporting, onshore, offshore and more. Not only have we grown, we’ve helped our agency clients grow too, protecting their margin and keeping them, and their end clients compliant.
For over 6 months now we’ve been working closely with our advisers, adding our weight to the consultation process and engaging with HMRC on these topics. Watch this space for changes and possibly for umbrella 2.0 to emerge. December 9th is a key date for your diary and we’ll be keeping you informed.
As ever, the only constant in this sector is change. And, as ever, it’s not the strongest of the species who survive, or the biggest, but the ones most adaptable to change.
Speak with one of our qualified experts today to find out how forest can help you stay adaptable.
Every week, the forest team visits one of our client agencies and awards them agency of the week. The selection process is brutal and only the fittest survive! This week, LTS enjoyed a few bubbles courtesy of forest. Congratulations to the team at LTS – well deserved!
LTS Group offers you the very best, whether you are looking for a job in a school as a supply teacher, classroom assistant or nursery nurse.
In a bid to capture more of the healthcare market, forest has launched forest locums. With industry-leading USPs, forest locums is set to expand fast. Group MD, Jovan Pavlicevic commented:
We’re really proud of our specialist locums umbrella. This strengthens our position by offering something completely unique, tailored for locum doctors and nurses. Agencies supplying the NHS will be aware of the complexities surrounding VAT on this supply. We have this element covered, and to add a huge USP we’ve taken the step of adding full medical malpractice insurance. This is an area that most umbrellas are gambling with, since the RCN revoked coverage for its members last year, to avoid subsidising under performing employers. Forest has picked up the gauntlet and is now leading the way in supplying medical agencies.
For locum agencies wanting to get the best for their workers, or if you have concerns around VAT or med mal, contact forest today.
On April 6, 2015 new legislation comes into effect for recruiters and employment intermediaries.
OK, what does that mean for me?
The new rules mean that recruiters need to report to HMRC any worker that falls outside their own PAYE payroll. The first report relates to information produced in the three months from April 2015 until 5th July 2015 is due to be with HMRC by 5th August 2015. Recruiters need to provide this information by law, and must use HMRC’s standard templates to report this information.
As always, forest is at the forefront of helping our agency clients understand and comply with the ever-changing legal landscape. We were one of the first businesses in the UK to go live with RTI in the HMRC pilot, and as the UK’s highest qualified umbrella, we’re continuing our commitment to compliance by making reporting easy for our recruitment partners.
What’s the motivation behind the changes?
The government and HMRC have been introducing new legislation at a rate of knots. Onshore and offshore intermediaries being some of the most recent. This change is now about policing those new rules. To put it simply, HMRC wants to understand how everyone is paid, to start policing the unscrupulous operators in the market. Loans schemes and EDMs are on the radar for HMRC, as well as offshore umbrellas.
I run a recruitment agency – how does forest help me?
Simple – we’ll handle the reporting for you and provide you everything you need, in the right format, on time, for you to provide to HMRC.
And what if I get it wrong?
If your report is late, incomplete or incorrect you can be fined.
£250 – first offence
£500 – second offence
£1,000 – third and later offences
What are the key dates for reporting?
6 April to 5 July – report due 5 August
6 July to 5 October – report due 5 November
6 October to 5 January – report due 5 February
6 January to 5 April – report due 5 May
And what do I need to send?
Don’t forget, forest will do all this for you – but the report will include:
Your full name, address and postcode
The worker’s personal details
The engagement and payment details
And then the following worker details:
Full name, address and postcode
NI (if they have one and you don’t know their date of birth and gender)
Date of birth and gender (if they don’t have a NI number)
Along with the payment and working details:
You must select the reason why you didn’t operate PAYE on the workers payments from these options:
C: Limited liability partnership
D: Limited company including personal service companies
E: Non-UK engagement
F: Another party operated PAYE on the worker’s payments
The report should also include:
Unique taxpayer reference – if they are self-employed or a member of a partnership
Start date of work with client
End date of work with client – if there is one
For any payments that aren’t reported to HMRC using RTI, the report must also include:
Total amount paid for the worker’s services
Whether or not VAT has been charged on the payment
The full name or trading name and address of who the intermediary paid for the worker’s services
Company registration number if the worker was engaged to do the work through a limited company (option D)
And what records need to be kept?
You need to keep proof that what you sent to HMRC was correct. HMRC may ask you for this information. This information should include any documents that show why you didn’t operate PAYE on the worker’s payments, and documents need to be kept for at least 3 years after the end of the tax year that they relate to.
Where can I read more?
You can get the detail direct from HMRC by clicking here… But the important thing to know is that as an agency client of forest, we have you covered. We’ll do the work, keep track of everything and we’ll make sure your reporting goes smoothly, allowing you to continue to grow your business. Just contact us today to join hundreds of other UK agencies who benefit daily by partnering with forest
Today the REC released figures following its latest compliance audit – and 193 applicants failed. This list included a number of existing REC member firms, as well as some new applicants.
One point all recruiters would do well to take note of is why most of these firms failed. According to the REC, lack of knowledge around the AWR (agency worker regulations) was the major issue. We spoke with forest MD, Jovan Pavlicevic:
At forest we invest a lot of time in working not just with our agency clients, but also helping them to educate their own clients. We’re all involved in the staffing supply chain together, and nowhere is this more apparent than with the AWR. By increasing awareness and educating our clients we’re helping to raise standards from end to end in the supply chain, and that can only be a good thing.
Agencies who need help with a better understanding and better control around issues like the AWR should contact forest. So far today we’ve had 193 calls relating to this…
We’re excited to announce our silver membership of the IOR (Institute Of Recruiters)!
The IOR is a Professional Body providing guidance, training, education & networking opportunities to those working in Recruitment & HR.
Jovan Pavlicevic, the forest MD says:
“The forest team invests a lot of time and energy into lifting standards in our sector and part of this is working closely with the recruitment community. Strengthening our ties with recruiters through our IOR silver partner status is another example of our ongoing commitment to the sector”.
You can read the full IOR press release here.