Implications of Pre Budget Report and HMRC announcement on MSC Legislation

Recent announcements from the Government have direct and far reaching implications for recruitment agencies, their contractors and temporary workers and providers of Umbrella and other payroll services.

As part of the Pre-Budget report the Government announced that following the consultation 'Tax Relief for travel expenses: temporary workers and overarching employment contracts' it has decided to leave the current rules unchanged. Employees of umbrella companies and recruitment agencies will still be able to claim tax relief in relation to travel and subsistence relief. This news came with a warning that the responses to consultation revealed poor levels of compliance within the industry and HMRC would reinforce its efforts to crack down on compliance.

On 3rd December 2008, HMRC made known it has seen a growth in intermediary companies, based both in the UK and offshore, which market to individuals for the provision of their services to clients, but which claim not to be managed service companies. HMRC intends to investigate and challenge these companies where appropriate, and if successful expects to recover the PAYE and NI debt. If the company is unable to pay, there is a risk (through the transfer of debt provisions) to providers of such companies, their associates and individuals providing their services through such companies. In the same announcement they also indicated concerns with self-employment within the Construction Industry Scheme.

We are delighted with the outcome of the consultation. We have committed a great deal of time and money working with our advisors to ensure that all our offerings - Umbrella and our CIS and self-employed options that we launched in October- comply with current legislation. It has long been our view that contract and temporary workers should be able to receive tax relief on legitimate work related expenses because of the nature of their work patterns and contracts of employment.

Unfortunately, the reputation of the industry continues to be tarnished by unscrupulous providers of Umbrella and other payroll services that exploit workers through abuses of expense dispensations or off-shore solutions. These companies are putting their contractors and agencies at risk. The announcement by HMRC that they will be stepping up compliance visits and litigating where appropriate means that contractors and agencies must be confident that their supply chain is compliant.

In order to be completely open with HMRC, Gabem recently invited specialists from the Revenue into its Head Office to review their policies, processes and procedures and to meet some of the staff who operate the systems. We were delighted to receive compliments on the robustness of our expenses system which in turn provides our clients with confidence that our offerings are compliant.

You can be assured that Gabem will continue to lead the way in compliant Umbrella, CIS and self-employed services for temporary and contract workers so you can be confident that not only will you receive the best service in the industry but also the assurance that you and your workers are not at risk.

If you would like to discuss the implications of the legislation for your business or our services please do not hesitate to contact me.

Kind regards.

Yours sincerely,

Trudy Gordon
Managing Director