Recruitment directors to be penalised for unpaid taxes due to false self-employment

RA Now

Recruitment agency directors will be held personally liable for unpaid tax and potentially national insurance as a result of self-employment claims, according to the finer details of the new Finance Bill.

Recent amendments to the bill identified recruitment agencies as liable for any unpaid tax and NICs for self-employed temporary workers in their supply chain, and state that agencies will have to prove self-employment.

But following a more detailed reading of the amendments, giant group says that changes to Clause 16 of the bill have confirmed that directors would receive personal liability notices should the recruitment consultancy involved fail to pay. The legislation goes on to state that, if there is more than one involved in the company, all directors will receive the notice and will be jointly liable to pay HMRC.

The notice would detail the amount payable, including interest – which runs from the date the notice is served – and the director(s) have 30 days to pay HMRC. They may appeal against this within 30 days of the notice being served, detailing the grounds on which they appeal.

 “While we welcome the expected crackdown on tax avoidance in the Finance Bill, the personal liability amendments are incredibly harsh on recruitment agency directors,” said Matthew Brown, managing director of giant group. “For these individuals, the need to ensure all workers in their supply chain are not paid as self-employed workers is now more important than ever.” 

“Agencies and RPOs that contract directly with the hirer need to undertake a detailed review of all their current workers and their intermediaries to determine how workers are paid, and to assess their risks, moving workers were necessary. However, by putting in place and enforcing a strict Preferred Supplier List, agencies can manage their financial risks,” he added.

From April 2015, recruitment consultancies will be required to report quarterly to HMRC on all gross payments made to workers and/or intermediaries. There will be no legal defence other than where fraud is involved, and targeted anti-avoidance provisions (TAAR) will focus on those consultancies who try to circumvent the legislation.