Public mood may well have driven HMRC to look into tackling tax avoidance by contractor companies more robustly and it appears that the industry is seeking clarity.
The hot topic in the UK at the moment appears to be that surrounding tax avoidance and tax evasion. Whether this is caused by a public backlash against global companies that are paying low amounts of corporation tax, or an uproar over the use of legal offshore avoidance schemes by celebs and wealthy individuals or what has been long under the spotlight relating to practices in the contractor services market, the subject is seldom out of the news.
So it would seem that there is mounting pressure on HMRC to tackle and outlaw such abuses and provide plans to step up efforts in this area.
National Insurance Contribution avoidance seems to be a prime target for HMRC. In short, new measures announced as part of the forthcoming National Insurance Bill are intended to create a general anti-avoidance rule for NICs and to restrict the use of offshore umbrella companies as intermediaries.
For most of us in the industry, any initiative that can stamp out aggressive offshore tax practices has to be welcomed. Unfortunately it would appear that many companies involved in the supply chain process are unaware of the risks that they are putting themselves under by using such schemes. Many umbrellas have expressed their approval of any measures that will curtail the surge in companies coming into the market offering high levels of take-home pay (up to 95%) in some cases while making little or no contribution to HM treasury.
Lisa Keeble, managing director of ContractorUmbrella Ltd reckons that anything that will “tidy up” and positively enhance the profile of umbrella is to be encouraged and while it may bring added work, the end result will be worth any pain.
“The more schemes out there that are offering exorbitant take-home pay the less marketshare there is.” she says. “Those that are compliant may have to work that bit harder but if it takes out of the market those that are bringing the industry down then all well and goo.” She continues light-heartedly: “We’re quite used to filling in forms.”
The proposed legislation may be some way off, however it is hoped that it will compel some agencies to revisit their contractual arrangements with all of their employment solutions service providers. Additionally, this could be further fuelled by HMRC’s move to use the powers it has under managed service company legislation to issue debt transfer notices to individuals and legal entities, including agencies, to recover lost monies.
Article from Recruiter Magazine.