At a recent meeting of industry body, All Umbrella Companies Are Equal members were given the chance to question HMRC’s Robert Burton about the raft of new legislation that’s due to come into force to tackle tax avoidance. Robert stated that it was not HMRC’s intention to clamp down on the genuinely self-employed but that it was necessary to consider the question of control when determining whether or not contractors would be affected by the changes to the Agencies Legislation. He also confirmed that dividends are not remuneration for the purposes of the Agencies Legislation and therefore PSC’s will not be affected. PSC’s had been referred to in the guidance purely to deter scheme providers from creating a tax scenario involving dividends which would have no purpose other than to avoid tax and create an artificial structure. He referred to the case of HMRC v PA Holdings which involved a company paying workers in dividends; the Court held that those payments were to be treated as emoluments from employment and they would be subject to class 1 National Insurance Contributions.
That said, there will still be a reporting requirement for agencies working with PSC’s, whether they are outside or inside of IR35. Agencies will need to provide HMRC with the PSC company name, reference number, individual’s name and the sums that have been paid to them. Robert was happy to confirm that agencies would not be at risk from using a PSC. However, he did state that the only exception would be if agencies were to wholesale move workers to PSC’s in an attempt to avoid any responsibilities that arose from the Agencies Legislation. In that case TAAR (Targeted Anti Avoidance Provision) would come into effect. The returns that would be made to HMRC would show if such a move had been made.
Robert also confirmed that, if any agency were to attempt to force contractors down a specific route in order to avoid obligations under the changing legislation they may fall foul of TAAR if their motivation were questionable according to HMRC. Penalties that could be applied in this situation would be up to £3000 per instance.