Recruitment sector voices worries about false self-employment law

RA Now

Two recruitment associations have written to the Treasury with fresh concerns about the new false self-employment laws.

The rules, published under the Finance Bill 2014, place a “disproportionate risk exposure” on recruitment businesses, according to ASPCo, and could expose the government to legal challenges.

The law is designed to combat the use of the self-employed supply model under which often low paid workers are labelled as self-employed in order to reduce tax and national insurance contributions. Under the rules, recruitment agency directors will be held personally liable for unpaid tax and potentially NICs for self-employed temporary workers in their supply chain, and agencies will have to prove self-employment.

APSCo believes that deeming one person to be liable for tax when they have no connection with the tax liability could breach the Human Rights Act, and has asked the Treasury to amend the legislation to provide for a statutory defence against the provision of fraudulent documents by other parties in the supply chain.

“We believe this is a red herring as the reality of the situation is that the onus would be on the intermediary to prove not only that fraud had taken place – but also that there was an intent to defraud,” said Samantha Hurley, head of external affairs and compliance. “Proof of negligence would not be sufficient and intent to defraud is acknowledged to be extremely difficult to prove in court.”

“We are certainly not arguing for the removal of the legislation altogether – but what we are asking for is a defence for recruitment firms in the event that they have undertaken reasonable due diligence – a defence which already exists in the Agency Workers Regulations.”

The Association of Recruitment Consultancies has also written to the Treasury Minister to request a review of the new test.

Adrian Marlowe, chairman of the ARC, said: “The default position is that whatever the role or seniority of the worker the agencies supplying them will have to apply the PAYE rules to payments due, without any allowance for expenses, unless the agency is willing to take a risk. This is because the PAYE rules apply wherever there is any element of direction, supervision or control as to the manner, meaning ‘how’, (“the SDC test”) the services are provided by the individual concerned.”

“Agencies are not lawyers, and whilst an agency can argue that the SDC test is not satisfied, it needs evidence from third parties to be able to do so,” he added. “This is against the backdrop that the SDC test does not specify what constitutes evidence, the requirement being that it must ‘be shown’ that the test is not satisfied. It means that an agency which is told by a client that there is no SDC could still be liable for the PAYE and employers NICs if it transpires that SDC was present, unless the client was deliberately dishonest in making the statement.”