2016 A R E C R U I TE R SU P P L E M E N T
MANAGING AGENCY WORKERS & CONTRACTORS 2016
HMRC GETS ITS DUCKS IN A ROW TO PREPARE FOR ENFORCING MSC LEGISLATION
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Changes in legislation can be brutal.
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2 0 1 6 MANAGING AGENCY WORKERS & CONTRACTORS
A brave new contracting world Everyone expected the last 12 months to be tough, especially for those of us involved in the temporary recruitment sector. But little did we know just how turbulent those 12 months would prove to be. Barry Roback, director at Anderson Group, looks at the future of contracting in the UK.
+ Barry Roback, Director, Anderson Group
f we thought last year was ‘challenging’, this year looks set to shake the very foundations of our industry. With such fundamental legislative change heaped upon the recruitment community, the impact on the UK’s temporary labour supply chain may prove to be seismic. As an industry, however, we have no choice but to deal with legislative change in the best way that we can. Major changes to the tax treatment of travel & subsistence expenses, changes to the rules affecting salary sacrifice and an even greater focus on the humble limited company – all of this is having a huge impact on agencies, hirers, contractors and intermediaries alike. It is still early days to gauge the long-term impact of this turmoil, but the question can certainly be asked today: ‘What is the future of contracting in the UK?’ For an agency, the short and medium term is especially challenging. Contractors will no doubt be looking for rate increases to compensate for their loss of tax-free expenses. Some agencies will have also lost the valuable processing/administration fee income they used to enjoy from their preferred supplier list (PSL) umbrella firms. With contractors squeezing from one end and hirers resisting rate increases from the other, many agencies have been left wondering what their best options are for the future. Interestingly, at a series of roundtable discussions recently hosted by Anderson Group on this subject, agencies were unanimous in their belief that there is still much work to be done to cope with recent legislative changes, with most also agreeing the dust has yet to fully settle. Many agencies outlined plans to examine new approaches to maximise their profits, such as an increased focus on outsourcing non-core activities to help reduce overheads. This is an area that Anderson Group has been busy working in, realigning our business for the ‘brave new world’, and creating a range of products and services to help agencies remain compliant, cut operating costs and stay profitable. There should be no doubt that the legislative changes are having a profound effect on the way that the contractor market organises itself. Suppliers who suggest otherwise either have their heads very firmly buried in the sand, or worse, will be offering non-compliant solutions to the market. Those agencies able to re-engineer their businesses today, rather than in a few years’ time, by working with suppliers who have already successfully addressed the changes, will no doubt be ahead of the curve and emerge better equipped than ever into the new business landscape now taking shape. ●
“There is still much work to be done to cope with the recent legislative changes, with most agencies also agreeing the dust has yet to fully settle”
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ver come across a 1980s novelty pop song by Timbuk3 called The Future’s So Bright, I Gotta Wear Shades? That title still makes me smile, and I’ve used the phrase myself when experiencing a particularly pleasing success. For the subject of our Managing Agency Workers & Contractors 2016 supplement, Timbuk3’s immortal words have to be altered somewhat: “The future’s so bright, I can’t see anything ahead “On a more of me in this light”. Or serious note, perhaps something the future of around getting caught in the umbrella the glare of headlamps, and payroll the HMRC spotlight, etc. solutions You get the idea. industry is far On a more serious note, from clear” the future of the umbrella and payroll solutions industry – and how temporary workers and contractors will be paid legally – is far from clear as this publication goes to press. Combined legislation that took effect in April and a recent court decision are weighing heavily on the operations of these service providers and will have no small impact upon recruiters, temporary workers and contractors. That said, leading industry experts share their visions of the future in these pages, and frankly, the view from their side of the landscape generally looks pretty bright. Have a read for the most insightful view possible of the future.
DeeDee Doke, Editor
Managing the year ahead We speak to key players in the contractor services sector to get their thoughts on opportunities that lie ahead for the sector
HMRC gets its ducks in a row Following a landmark court case, managed services companies need to be clear on the implications of the new legislation
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WHERE DO YOU SEE THE GREATEST OPPORTUNITIES FOR PAYROLL, UMBRELLA AND ACCOUNTANCY SOLUTIONS PROVIDERS OVER THE NEXT 12 MONTHS?
MANAGING THE YEAR AHEAD As demand for temporary workers and contractors continues to grow, Recruiter’s Colin Cottell speaks to key players in the contractor services market
NEIL AYTON Finance director, 3R
Legal director, PayStream PERHAPS SOME OF THE GREATEST OPPORTUNITIES FOR TEMP/CONTRACT PAYROLL AND ACCOUNTANCY PROVIDERS LIE IN USING FINANCIAL TECHNOLOGIES. Taking advantage of such technologies will enable providers to tailor their solutions to ensure that clients’ commercial and statutory requirements are met. Importantly, it can save time spent by clients on admin by designing efficient userinterfaces, and provides the facility to access information on the move.
V OX POP
Providers should always be thinking about how they can ease the administrative burden of their clients by freeing up more of their time. Technology used in the right way offers plenty of scope to achieve this.
ACCORDING TO THE ONS [OFFICE FOR NATIONAL STATISTICS], THE MARKET FOR FREELANCERS AND TEMPORARY WORKERS CONTINUES TO GROW. In Q1 this year there were 20,000 more self-employed and 28,000 more temporary employees than this time last year, so the market is currently showing no sign of slowing down. Given this, these workers still need to be paid and the most efficient businesses at processing pay (and providing employment rights) have traditionally been umbrella companies, which we don’t see changing in the near future. We think the umbrella market will consolidate as the smaller players drop out, giving the more established players the opportunity to grow their customer base, providing them with an even stronger position in the market.
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4 AMANDA HOBSON Managing director, Easypay HAVING SPOKEN TO MANY UMBRELLA COMPANIES RUNNING UP TO 6 APRIL, IT WAS APPARENT THAT MOST WERE RE-MODELLING TO BE ABLE TO CONTINUE TO OFFER AGENCIES SOLUTIONS. Some were providing just the HM Revenue & Customsapproved models, accepting that a loss of revenue was imminent, while others were exploring other tax-efficient loopholes, which were dangerously close to being tax evasion schemes. It has been interesting to see that some major blue-chip agency providers have taken a stance and moved the majority of workers onto their own PAYE (pay-as-you-earn) schemes. This is not an option for smaller agencies operating on tighter margins and they continue to pay their whole workforce via umbrellas.
“Umbrella revenues have been hit, and consequently, some are focusing on entering new markets”
MARCUS GREEN Director, Nova Contracting
Nevertheless, umbrella revenues have been hit, and consequently, some are focusing on entering new markets such as funding and accountancy services.
RECRUITERS HAVE FACED A CONSTANT STREAM OF NEW RULES AND CONSULTATIONS ON YET FURTHER CHANGES [TO EMPLOYMENT REGULATIONS] AND ALL AGAINST A BACKDROP OF EVER-GROWING DEMAND FOR TEMPORARY WORKFORCES.
At Easypay, we have already seen an increase in PAYE workers, as we offer our clients a full PAYE scheme included as part of our 100% funding and back office service. But with time, and as case studies appear, I expect the growth of PAYE to increase as the year progresses and more end-user clients realise the ramiﬁcations of potentially employing workers in loophole schemes.
Around 1.2m people are on temporary, contract or interim assignments through a recruiter on any given day. With agencies increasingly commissioning us to support and supplement their own teams, this continues to be a strong opportunity for us. In this highly competitive market, contractors and agencies value employment solutions that are compliant and straightforward, and reputable providers will continue to grow to meet this demand.
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o co u
Pa nt on
the beneﬁts all stack up.
Managing director, FPS (Freelance Professional Services)
y St r e
Statutory benefits Secure a mortgage or loan easier Pension pot Employee rewards Inclusive insurance Loyalty scheme
Even though the tax relief rules on travel and subsistence have changed, we’ve still got a great deal for contractors all packaged up. That’s because our My Max umbrella balances the benefits of continuous employment, with all the advantages of being a contractor.
THE GREATEST OPPORTUNITIES FOR PROVIDERS OF TEMP/CONTACTOR SERVICES COME FROM PROVIDING PROFESSIONAL OUTSOURCING SOLUTIONS THAT ALLEVIATE AGENCIES OF THE EMPLOYMENT RISK AND ADMIN HASSLE ASSOCIATED WITH RUNNING A TEMP PAYROLL THEMSELVES. The days of purchasing some basic software and ﬂogging ‘keep 90% of your pay’ tax-avoidance solutions over the internet are thankfully drawing to a close. Well-resourced and professionally-operated ﬁrms stand to gain marketshare through detailed knowledge of complex legislation, timely and accurate delivery of payroll data, and the quality of their customer service to agencies and contractors alike.
With My Max contractors can: • Access statutory benefits such as SMP and SSP • Secure a mortgage or loan more easily with one continuous employment record and advice from our IFA partners • Manage one pension pot • Enjoy an employee rewards scheme • Save money with inclusive insurance • Join our employee loyalty scheme
My Max is easy to set up in under 10 minutes and simple to manage online with our phone app and portal so contractors are always on top of their pay, timesheets and tax as well as knowing when and how much they will be paid with our text message service. All backed by PayStream’s award-winning, attentive service. Giving you the peace of mind that your contractors are always fully compliant. For an umbrella service with far reaching benefits, try My Max. Another reason to count on PayStream.
Call 0800 197 6516 e: email@example.com or visit www.paystream.co.uk
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Worried about the changes to Travel and Subsistence?
How will the new legislation affect your business?
Is the loss of tax relief going to hit your bottom line?
Well talk to us, as we have a new range of payroll solutions that will continue to provide efficiencies and deliver significant cost savings.
0845 450 4194 www.contrella.co.uk firstname.lastname@example.org
MANAGING AGENCY WORKERS & CONTRACTORS 2 0 1 6
Chief executive, Freelancer & Contractor Services Association (FCSA)
With UK plc more reliant on the ﬂexible workforce than ever before it gives professional support service providers like umbrella employers and accountancy ﬁrms a big opportunity to help those workers manage their ﬁnances properly. Furthermore, with the move to shift IR35 responsibility onto engagers for public sector roles, we will see an opportunity for our sector to minimise the recruiter/engager risk and give assurance that calculations are being done properly and the right tax is being paid.
THERE ARE AN INCREASING NUMBER OF PEOPLE OPTING TO WORK AS CONTRACTORS AND FREELANCERS.
Managing director, ICS OFFERING CLIENTS ADVANCED CLOUD ACCOUNTING SOFTWARE IS KEY, SO CLIENTS CAN EASILY MANAGE THEIR ACCOUNTS.
Advanced software is especially important due to the plans to digitise tax, which will undoubtedly gain momentum during the year. Another key development is the recently-introduced changes to travel & subsistence (T&S) expenses. Over the next 12 months, we expect to see the PSC [personal services company] market grow. Although the umbrella market has by no means ended, this will still have an effect on umbrella contractors. Industry is also awaiting further details on IR35 and the public sector in the expected HMRC summer consultation.
It pays to join the team CONTRACTING
Since 2001, over 32,000 contractors have chosen NOVA to look after their payments. With an enviable reputation for quality customer service, reliable payments and a commitment to compliance, you can rest assured that you are in the hands of the professionals. CALL TODAY TO FIND OUT MORE
0844 209 0800 www.novacontracting.co.uk
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MANAGING AGENCY WORKERS & CONTRACTORS 2 0 1 6
BARRY ROBACK Director, Anderson Group TO ACCOMMODATE THE EVER-SHIFTING REGULATORY FRAMEWORK, SOLUTION PROVIDERS NEED TO GO BACK TO THE DRAWING BOARD AND INNOVATE RATHER THAN TRY TO REWORK SOLUTIONS THAT ARE NO LONGER VALID. Just because we have become familiar with doing things in a certain way does not mean that such an approach works today. With the demise of the traditional umbrella, those providers who offer either innovation and/ or very low cost processing will survive. But with a shift back to independent business models such as PSCs, partnerships and selfemployment, only those (genuine) accountants who can offer a low cost cloud-based solution will succeed in the long term.
ANDREW PINNELL Marketing director, RACS Group THE SO-CALLED NEW ERA PROVIDES UNPARALLELED COMMERCIAL OPPORTUNITIES FOR BOTH TEMPORARY RECRUITERS AND PAYROLL PROVIDERS ALIKE.
CRAWFORD TEMPLE Chief executive, PRISM WITH CHANGE COMES OPPORTUNITY, AND THE LATEST BOUT OF CHANGES TO HIT THE SECTOR SUGGEST NO DIFFERENCE.
Payroll providers also need to add more value to their contractor offering if they are to develop long-term relationships with their customers. The demise of tax relief on travel & subsistence expenses for most contractors has levelled the proverbial playing ﬁeld and jettisoned customer service to the top of the agenda.
Recruitment companies are looking to their providers to help them understand the complexities of the new rules. This means those providers who have grasped and understood the changes and invested in their business development teams are already nurturing new relationships and obtaining more business. Where the increased knowledge is supported by compliant operational processes that are not only robust but also straightforward from the contractors’ perspective, this is further enhancing the relationships between recruiters and providers. The combination of knowledge supported by simple-to-apply operational processes seems to be key, and those who can deliver this mix will ﬂourish.
The trick will be to inspire and maintain loyalty with contractors who are increasingly aware of their dominant position in the marketplace: skill shortages, an ageing population and more vacancies than candidates ensure that the contractor is now truly king.
Similarly, providing recruitment agencies with a rich portfolio of additional beneﬁts such as free marketing support and workshops is central to the growth of payroll businesses. The days of existing as a purely transactional payment entity are long gone as recruiters demand a more sophisticated approach from those involved in their supply chain in this golden age of recruitment.
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FULLY-COMPLIANT PAYROLL SOLUTION FOR TION N WHITE LABEL OPTION FOR PROVIDERS ŽŶĂů ƉĂǇƌŽůů ƉƌŽĚƵĐƚ • EĞǁ ĨƵůůǇ ĐŽŵƉůŝĂŶƚ Θ ŽƉĞƌĂƟŽŶĂů ƉĂǇƌŽůů ƉƌŽĚƵĐƚ • ŵďƌĂĐĞĚ ďǇ ŝŶĚƵƐƚƌǇ ĞǆƉĞƌƚƐ Θ ƚƌĂĚĞ ďŽĚŝĞƐ • WƌŽǀĞŶ ĐŽŵŵĞƌĐŝĂů ďĞŶĞĮƚƐ ƚŽ ǇŽƵƌ ĂŐĞŶĐŝĞƐ • dĂǆ ĞĸĐŝĞŶƚ Θ ƌŝƐŬ ĨƌĞĞ ƉĂǇ ĨŽƌ ĐŽŶƚƌĂĐƚŽƌƐ • /ŶƚĞŐƌĂƚĞĚ ƐŽŌǁĂƌĞ ƉůĂƞŽƌŵ͕ ƉůƵƐ ƚŽƚĂů ƐƵƉƉŽƌƚ • KǀĞƌ ϲϬϬϬ ĐŽŶƚƌĂĐƚŽƌƐ ƌĞŐŝƐƚĞƌĞĚ ƚŽ ĚĂƚĞ ;:ƵŶĞ ϮϬϭϲͿ &Žƌ ŵŽƌĞ ŝŶĨŽƌŵĂƟŽŶ ƉůĞĂƐĞ ĞŵĂŝů dĞƌƌǇ ,ŝůůŝĞƌ ŝŶ ƚŚĞ ƐƚƌŝĐƚĞƐƚ ĐŽŶĮĚĞŶĐĞ͗
RACS R DSC has been successfully implemented, with hundreds of agencies and thousands of contractors h ĂůƌĞĂĚǇ ďĞŶĞĮƫŶŐ ĨƌŽŵ ƚŚŝƐ ŝŶŶŽǀĂƟǀĞ ĂŶĚ ƌŝƐŬ ĨƌĞĞ Ă new n model. Despite the claims of many in the industry, RACS DSC ŝƐ ĂůƌĞĂĚǇ ƉƌŽǀŝŶŐ ƚŽ ďĞ Ă ŇĞǆŝďůĞ ĂŶĚ ƚĂǆͲĞĸĐŝĞŶƚ ƐŽůƵƟŽŶ ǁŚŝĐŚ ƉĞƌĨĞĐƚůǇ ƐƵŝƚƐ ƚŚĞ ƌĞƋƵŝƌĞŵĞŶƚƐ ŽĨ the temporary recruitment sector. dŽ ĮŶĚ ŽƵƚ ŵŽƌĞ͕ ƉůĞĂƐĞ ĐŽŶƚĂĐƚ ŽƵƌ ŐĞŶĐǇ ĂƌĞ ƚĞĂŵ ǁŚŽ ǁŝůů ďĞ ĚĞůŝŐŚƚĞĚ ƚŽ ƐĞŶĚ ǇŽƵ ĨƵƌƚŚĞƌ ŝŶĨŽƌŵĂƟŽŶ Žƌ ĂƌƌĂŶŐĞ Ă ĐŽŶƐƵůƚĂƟŽŶ ǁŝƚŚ ŽŶĞ ŽĨ ŽƵƌ ƵƐŝŶĞƐƐ ĞǀĞůŽƉŵĞŶƚ ĞǆƉĞƌƚƐ͘
O F YOUR AGENCY
TEMPORARY RECRUITERS & CONTRACTORS AGENCY BENEFITS ϭ DŝŶŝŵĂů ĞŵƉůŽǇĞƌ ƌĞƐƉŽŶƐŝďŝůŝƟĞƐ
6 Adheres to MSC and not caught by IR35
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email@example.com | 0345 604 0571 | racsgroup.com
MANAGING AGENCY WORKERS & CONTRACTORS 2 0 1 6
HMRC GETS ITS DUCKS
IN A ROW A tax tribunal decision in April involving managed service company (MSC) legislation from 2007 could have huge ramiﬁcations for the agency and contractor market, including the possible transfer of contractors’ tax liability to recruitment agencies. Colin Cottell investigates
n the ﬁrst case brought before a tax tribunal under the MSC legislation, the tribunal judges rejected the appeals of ﬁve medical contractors against an HMRC [Her Majesty’s Revenue & Customs] tax demand. As a result, the contractors face back taxes of almost £160k between them. All ﬁve contractors worked through personal services companies (PSCs) that had been set up by service provider Costelloe Business Services (CBS). The case relates to the contractors’ earnings during the 2007/08 and 2009/10 tax years. The MSC legislation says that where a PSC is not a truly independently run company, but is effectively a company that is managed, controlled and inﬂuenced by a third party – termed an MSC provider (MSCP) – the PSC is deemed to be an MSC. Under the legislation, an MSC’s income is treated as employment income and subject to standard PAYE rates of tax and National Insurance Contributions. However, the landmark case is likely to resonate well beyond the personal ﬁnances of ﬁve contractors. “I deﬁnitely think this tribunal will have wider ramiﬁcations,” says Sybille Steiner, partner and head of employment taxes
“Where a contractor is unable to pay their tax and NI bill, HMRC can go after the MSC provider, and its directors and associates”
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SYBILLE STEINER “BASICALLY, CBS DID TOO MUCH FOR THESE PEOPLE. FOR EXAMPLE, CBS’S OWN NAME WAS USED AS THE COMPANY SECRETARY FOR THE PSCS, IN DIRECT CONTRAVENTION OF THE MSC LEGISLATION”
PATRICK FORD “THE REVENUE CAN GO AFTER ANY OTHER PERSON WHO ENCOURAGED THE USE OF THE MSC, OR WAS ACTIVELY INVOLVED. GENERALLY, THAT IS AN AGENCY”
LOUISE RAYNER “COMPLIANT COMPANIES STAND TO BENEFIT AS AGENCIES SEEK TO MITIGATE THE RISK BY CARRYING OUT BETTER AND DEEPER DUE DILIGENCE”
in the London offices of law ﬁrm Irwin Mitchell. Barry Roback, director of umbrella and accountancy solutions provider Anderson Group, says that although the MSC legislation became law as far back as 2007, HMRC is prepared to use it to crack down on what it regards to be aggressive tax avoidance. “The MSC legislation is one of the few weapons available [to HMRC], and, clearly, they are still interested in going down [this] route,” says Roback. Indeed, comments made by the two judges involved in the tribunal indicate that other cases are in the pipeline. In their landmark ruling on 21 April, judges Guy Bannan and John Woodman said: “We also understand there are a number of other appeals concerning this legislation which are pending before the First-tier Tribunal.” According to Crawford Temple, chief executive of PRISM, where HMRC has identiﬁed that a particular provider may fall under MSC legislation, it has been writing to the provider’s contractor clients asking them about their working and contractual arrangements with that provider. PRISM is a trade body for service providers and intermediaries in the temporary labour market. The MSC legislation was originally introduced to tackle the use of massproduced intermediary schemes that helped contractors avoid falling inside IR35 (intermediaries legislation). These schemes were often heavily marketed and resulted in workers setting up off-the peg, standardised limited companies – PSCs. One advantage was they could boost their takehome income by paying themselves in dividends rather than through
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standard employment income, which is subject to higher rates of tax through PAYE and NI. By rejecting the contractors’ appeal against the HMRC tax assessment, the tribunal’s decision conﬁrmed that HMRC was right in deeming the income received by the ﬁve contractors to be employment income. HMRC says it expects to ‘safeguard’ £9m in total from limited companies set up under the scheme run by CBS. Irwin Mitchell’s Steiner says that at the heart of the CBS case – and the basis on which the judges decided the ﬁrm was caught by the MSC legislation – was whether CBS was a service provider that was ‘involved with’ the ﬁve PSCs. CBS argued that it “wasn’t involved” with the ﬁve PSCs. However, the judges rejected this contention. “Basically, CBS did too much for these people,” says Steiner. For example, CBS’s own name was used as the company secretary for the PSCs, in direct contravention of the MSC legislation. CBS also offered bank accounts to its clients, from which it withdrew funds to pay taxes without seeking their permission, and from which, unbeknown to the contractors, it also earned interest of £127k. It emerged that only 11 out of 1,000 accounts held by CBS’s clients were the clients’ own. As a result of this type of ‘involvement’, the tribunal decided that CBS met three of the ﬁve criteria that deﬁnes an MSC provider as being ‘involved with’ an MSC under the legislation. Only one of the ﬁve criteria needs to be met for an MSP provider to be deemed ‘involved’. (See right for a fuller description of the ﬁve criteria.) “They weren’t just an accountancy ﬁrm that provided some advice to help these companies, they were effectively running the companies… the individuals didn’t have a good idea what was going on and what was being done,” adds Patrick Ford, partner, tax strategy and beneﬁts at law ﬁrm Squire Patton Boggs. The repercussions of the CBS case don’t end there, however, with the judges making it clear that HMRC
POWER POINTS For the MSC legislation to apply, the MSC provider must be ‘involved with’ the MSC. The ﬁve criteria used to deﬁne ‘involvement’ are:
1 2 3 4 5
Benefitting financially on an ongoing basis from the provision of the services of an individual – eg. based on the number of invoices raised Influencing or controlling the provision of services of the worker – for example, dictating the terms under which the worker provides their services through a compulsory engagement contract Influencing or controlling the way in which payments to a worker are made – for example, how the company distributes its profits in terms of dividends and salary Influencing or controlling the client company’s finances, or any of its activities. HMRC says this should be the responsibility of the PSC’s directors Giving or promoting an undertaking to make good any tax loss
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2 0 1 6 MANAGING AGENCY WORKERS & CONTRACTORS
“In their ruling, the judges said that ‘in separate proceedings HMRC are seeking to transfer’ contractors’ tax and NI debts to CBS. Ford says he thinks directors of MSC providers are HMRC’s main target”
is invoki invoking other provisions in the MSC legislation that th could ultimately l i l see contractors’ tax and NI liability fall on recruitment agencies. In their ruling, the judges said that “in separate proceedings HMRC are seeking to transfer” contractors’ tax and NI debts to CBS. Ford explains that where a contractor is unable to pay their tax and NI bill, HMRC can go after the MSC provider, and its directors and
associates. Ford says he thinks directors of MSC providers are HMRC’s main target. However, he continues: “If all of these people can’t pay, or if it is impractical for the Revenue to recover, the Revenue can go after any other person who encouraged the use of the MSC, or was actively involved.” He adds: “Generally, that is an agency.” Ford says circumstances in which an agency could be caught are: “If they say to contractors, ‘we know service
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provider x. They are great, they will save you money and set up your PSC for you’.” “I don’t think agencies can do anything about historic cases, but going forward, I think they should just make sure they aren’t encouraging people to use a provider,” he advises. “The key thing is that if the agency has no involvement, then they have no risk,” says PRISM’s Temple. “If a contractor has already got a limited company and they move to agency A, then the agency won’t be pulled into the legislation and won’t be subject to a debt transfer because agency A wasn’t involved in any way in the contractor choosing that provider or in operating through that provider.” Julia Kermode, CEO at the FCSA (Freelancer & Contractor Services Association), a trade association for professional employment service providers, says the CBS case highlights the need for recruiters “to do their due diligence on workers working for them as PSCs and ensure there is no MSC provider in the background”. If there is no MSC provider, then the MSC legislation does not apply and there is no chance of debt transfer, she says. Damian Broughton, managing director of contractor accountancy solutions provider Danbro, agrees the case highlights the importance of agencies checking that intermediaries do not fall within the MSC legislation. He says that Danbro routinely receives questionnaires from agencies, which are designed to gauge how much control and inﬂuence it has over its contractors’ PSCs. “In this way, we can help them with their due diligence,” Broughton says. Another route is to use independently veriﬁed compliance standards that are available from a number of bodies in the market, including Professional Passport, FCSA and compliance consultancy Lawspeed. Temple says that the use of independently veriﬁed compliance standards is the simplest way of cutting out the risk of debt transfer. Kermode warns that the risk of agencies falling foul of the MSC
“Agencies should carry out due diligence with service providers and with contractors to ensure there is no MSP provider in the background effectively controlling a contractor’s limited company” legislation has risen following the introduction of new travel & subsistence legislation in April. This has led to fewer temporary workers working through intermediaries being able to claim T&S expenses free of tax, which has “resulted in some providers offering to move workers from umbrellas to limited companies”, she says. “Post the recent legislation changes, we have seen a number of offerings emerge into the market for targeting contractors operating through their own companies that we don’t believe are operating compliantly,” adds Temple. Louise Rayner, CEO of accountancy solutions provider NumberMill, says she welcomes the decision of the tax tribunal as evidence that HMRC is serious about targeting “unethical practices” employed by some service
providers. “If there are other cases coming along, that is a good thing,” she adds. At the same time, she warns of the danger that “all the noise” caused by the CBS case could put agencies off partnering with service providers that offer the limited company model. With heightened HMRC activity and the risk of debt transfer, Rayner suggests, they may see it as too risky. “It might make the market smaller,” she says. On the other hand, she says that compliant companies stand to beneﬁt as agencies seek to mitigate the risk by carrying out “better and deeper due diligence”. Danbro’s Broughton agrees that the PSC model is far from dead: “A limited company model is still an efficient way of working for a contractor, but it has to be run correctly.” For anyone in the sector who had forgotten that, this landmark tax tribunal is a sharp and potentially painful reminder. Agencies should carry out due diligence with service providers and with contractors to ensure there is no MSP provider in the background effectively controlling a contractor’s limited company. ●
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Use Floâ&#x20AC;&#x2122;s cloud based technology to automatically process timesheet data for your candidates. Floâ&#x20AC;&#x2122;s weekly consolidation process automatically generates invoice and payroll data, tracks information for AWR, and produces multiple MI reports saving agencies time and money.
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MANAGING AGENCY WORKERS & CONTRACTORS 2 0 1 6 A D VA N C E CONTACT DETAILS
T: 01244 564 564 E: firstname.lastname@example.org W: www.advance.online
ADVANCE supports the UK’s contractors, freelancers and recruitment businesses. Known for its commitment to compliance, it is the only provider to have passed the Freelancer & Contractor Services Association (FCSA) code of conduct in full. This means it’s the only company that’s FCSA-certified to provide: • Limited company accountancy services • Umbrella company employment • Self-employment & CIS solutions Umbrella contractors who pass ADVANCE’s ‘supervision, direction or control’ (SDC) status test are reimbursed for home-to-work travel & subsistence expenses, including variable mileage and fixed subsistence. ADVANCE is happy to bear the risk as dictated by new legislation, having gained significant SDC experience in the self-employment arena since 2014. Meanwhile, limited company contractors who choose ADVANCE’s premium accountancy package get company insurances included as part of a comprehensive service.
A N D E R S O N G RO U P CONTACT DETAILS
T: 0333 8000 800 F: +44 (0)845 280 2360 E: email@example.com W: www.andersongroup.uk.com
Anderson Group is one of the UK’s leading providers of support services to the recruitment sector and wider business community. With many years of working with and advising contractors and recruiters, few companies are better placed than Anderson to manage both diverse contractor arrangements, as well as comprehensive back office support services to agencies. Appreciating that not all workers and agencies operate within a typical 9-5 day, our offices in the UK, Philippines and India are on hand to provide support as and when needed. We understand both the operational side of recruitment businesses and the ever-changing regulatory landscape, so can scope services to meet the growth aspirations of your company yet still remain fully compliant with HMRC regulations.
C H U RC H I L L K N I G H T CONTACT DETAILS
T: 01707 671645 E: firstname.lastname@example.org W: www.churchill-knight.co.uk
Churchill Knight & Associates Ltd is one of the UK’s leading accountancy service providers for contractors. Established in 1998, we work alongside the recruitment industry to ensure your candidates receive the right accountancy service for their needs. Our service also provides your recruitment agency with a dedicated team who support directors and consultants to remain compliant with the latest HM Revenue & Customs (HMRC) legislation. As HMRC legislation becomes more complex, you can rely on our agency team to keep you updated, knowing you are collaborating with a team of reputable and qualified accountants. Working with us provides: • A preferential service for you and your candidates • Updates on HMRC legislation changes • A professional service accredited by Professional Passport We specialise in providing contractors with an expert accountancy service that is hassle-free and fully HMRC compliant, allowing both you and your candidates to feel relaxed. We have long-lasting relationships with many recruitment agencies in the UK who turn to us for guidance and support to assist their candidates, and we would be glad to help you do the same.
CREST PLUS CONTACT DETAILS
T: 01244 684700 E: email@example.com W: www.crestplus.com
We provide an extensive range of accountancy, tax, contracting and financial services to individuals, sole traders, contractors and people who own their own business. This means we can help your contractors regardless of their individual needs. Working compliantly is part of our continued success, and we work with you to ensure we all stay on the right side of the legislation. We are trade association members of Freelancer and Contractor Services Association and adhere to the standards set out in the FCSA Charter. We also hold Investors in People – Silver, something we are particularly proud of. We value everyone who works with us and will always strive to do our best by you. We do this by: • Making sure we have the expertise you need and can rely on • Having a proven track record in customer service and people like dealing with us • Being big enough to do what is needed without losing the personal touch • Never being complacent and ensuring you receive the quality service you deserve.
Call to action: Call our friendly team now to see how we can help you meet your business needs.
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2 0 1 6 MANAGING AGENCY WORKERS & CONTRACTORS E A S Y P AY S E R V I C E S CONTACT DETAILS
T: 01943 882106 E: firstname.lastname@example.org W: www.easypayservices.co.uk
Easypay has provided specialist recruitment funding and back office services to new and established agencies since 2001. We have over 30 years of combined industry experience and everything we do has been devised by recruiters for recruiters. As an owner-managed family company, we can be flexible to adapt to your developing needs. Our all-inclusive service includes 100% recruitment funding with no concentration limits and credit insurance to enable you to supply staff immediately. We guarantee to pay temporary workers every week on your behalf, and we pay margin payments as invoices are sent out, transforming your cashflow and allowing you to fulfil your company’s potential. We can also fund and process perm invoices. Our dedicated credit controllers protect you from exposure and potential bad debts. Specialist training, mentoring and ongoing advice keep you abreast of constantly changing tax and legislation requirements, plus best practice. Our payroll, credit control and finance teams are based in-house and always accessible. Our fees are transparent. One simple variable fee based on your turnover gives you access to our comprehensive solutions.
F P S G RO U P CONTACT DETAILS
T: 0800 634 4848 E: email@example.com W: www.fpsgroup.com
Established in 1994, FPS Group is the temporary work sector’s most trusted and reliable employment solutions provider. We take away all the hassle and administration of running your own agency payroll – so you can focus on what you do best. Our extensive experience has taught us that clients are looking for simple, effective solutions from a provider that has their best interests at heart. We offer a range of fully compliant services to contractors providing flexibility to meet their personal circumstances and requirements. We are proud to offer an ultra low-cost flexible employment solution (umbrella solution), known as Flex, which is safer for both the contractor and agency than comparative competitor service offerings. Key recruitment agency benefits provided by using our Flex solution include significantly reduced administration burden, dedicated account manager, increased margins, zero risk of debt transfer for directors and happy contractors benefiting from one of the lowest umbrella fees in the market. Additionally, we are able to assist agencies and contractors seeking their own limited company, via our affiliation with Method Accounting. Speak to us today to find out more. FPS Group is a trading name of Freelance Professional Services Ltd, licensed by the Isle of Man Financial Services Authority
ICS CONTACT DETAILS
T: 0800 195 3750 F: 0844 259 0028 E: firstname.lastname@example.org W: www.icsuk.com
Qualified accountants ICS supports contractors in setting up and working through their own limited company, as well as operating an employment solution via ICS Umbrella. We’ve been working in partnership with recruitment agencies since 2002, removing the burden of pay queries and compliance issues by ensuring contractors are paid quickly and have access to 24/7 advice, enabling you to focus on placing your candidates. Working in partnership, speak to us online at www.icsuk.com or call 0800 195 3750.
N O VA C O N T R A C T I N G CONTACT DETAILS
T: 0844 209 0800 E: email@example.com W: www.novacontracting.co.uk
Leading payroll and company management services provider Nova Contracting operates across the logistics, industrial, education, healthcare, catering and hospitality sectors, working with the UK’s leading recruitment agencies and contractors to reduce costs, increase profits and deliver flexible employment solutions. Experts in contracting, we specialise in the provision of reliable, tax-compliant services to temporary workers and contractors. Our specialist team has extensive experience and has provided support services to the UK recruitment industry for 15 years, ensuring compliance with all HMRC requirements.
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MANAGING AGENCY WORKERS & CONTRACTORS 2 0 1 6 NUMBERMILL CONTACT DETAILS
T: 0333 121 2001 F: 0333 121 2002 firstname.lastname@example.org www.numbermill.co.uk
NumberMill is a firm of qualified practising ACCA accountants, who specialise in contractors and recruitment agencies. All our accountants are trained in IR35. Our CEO Louise Rayner (FCCA) has held Board-level positions in Adecco and Randstad, and recently sold her recruitment business to Staffline. Very few in the sector can genuinely say they have been both a buyer and seller of compliant payment solutions. NumberMill offers: • Compliance consulting, particularly with regard to payroll and HMRC related legislation • Payroll services – o Bureau o Umbrella (subject to relevant legislation) o Contract for services • Accountancy services for contractors • Outsource finance for recruitment businesses • NED (non-executive director) services for recruitment businesses Future-proof your margin and your compliance risk by engaging with NumberMill’s accountants.
P AY S T R E A M CONTACT DETAILS
T: 0800 197 6516 E: email@example.com www.paystream.co.uk
Run by qualified accountants and lawyers, PayStream is one of the leading providers of limited company, umbrella company and back office services to contractors and recruitment agencies. With a portfolio of services, we deliver bespoke solutions for clients rather than offering a one-size-fits-all approach. We believe in offering real choice and a first-class service, which is why over 90% of customers asked advised that they would refer our services to a friend. Our in-house expert legal and compliance team ensures that our clients get the very best advice through changes in legislation. We also pride ourselves in adapting to legislative changes quickly and effectively, which is why we work closely with many different agencies including most of the UK’s top 20. For a friendly straightforward approach that makes life easier for you and your contractors, you can count on PayStream.
Q X F I N A N C E & ACCO U N T S CONTACT DETAILS
T: 0845 838 2592 E: firstname.lastname@example.org W: www.qxfa.co.uk
QX Finance & Accounts Outsourcing (QXFA), a division of the QX group of companies, specialises in delivering payroll and accounting services to recruitment agencies in the UK. Having worked with permanent, temporary and contractor recruitment agencies for over a decade, we excel in high volume payroll processing. We stay on top of the HMRC legislations that affect agencies providing contractors to the public sector, and take care of compliance so you don’t have to worry about it. Our payroll professionals and accountants receive regular training and knowledge transfer, and are also trained in the use of relevant accounting software like Sage, SAP Business One, Merit, Oracle, Eclipse, ETZ and many more. Whether you are seeking process improvements, crave freedom from worrying about compliance, want to streamline costs, or wish to avail the benefits of a flexible workforce, you can rely on us. QXFA’s smart payroll services include: • Running BACS Report • Generation of payslips • RTI submission • Year-end processing • Auto enrolment • Filing of PAYE and NICs returns • Set up of starters, leavers, clients and placements • P45, P46 and P60 processing • Client invoicing • Pay & bill (daily/weekly/ monthly) • Timesheet processing • Provision of tailored reports
R AC S G RO U P CONTACT DETAILS
T: 0845 604 0571 E: email@example.com W: www.racsgroup.com
RACS Group is one of the leading UK-based payroll providers with an unrivalled reputation for compliance and customer service. The award-winning company provides temporary recruiters and contractors with a portfolio of payroll models including the new RACS DSC (direction, supervision or control), umbrella (no travel & subsistence expenses), PAYE and PSC. Each model has been designed to protect agency owners and directors from any risk of debt transfer and to help contractors choose the most appropriate product for their professional circumstances. RACS Group also offer agencies a portfolio of additional benefits including cash-neutral marketing assistance, office refurbishment, design and relocation services, CPD training events for contractors, plus team-building and training seminars for consultants. The company is based in state-of-the-art headquarters in Warminster, Wiltshire with an expanded national office network in London, South-West & Wales, the North-West, North-East and the Midlands. • To find out more about RACS Group and how the company can help your agency grow, please contact our dedicated Agency Care team on 0845 604 0571 or email firstname.lastname@example.org. Alternatively, please visit www.racsgroup.com.
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