GABEM BACKS HMRC CRACKDOWN

The Pre-Budget Report confirms no change in legislation surrounding overarching contracts and eligible expenses. But HM Revenue and Customs (HMRC) warns of a programme concentrating on non-compliant umbrella providers who seek to obtain a tax advantage by abusing the expenses system.

Gabem Management Limited is a long-established provider of Umbrella arrangements for temporary workers, many of whom are in the construction industry. Earlier this year, Gabem contributed to the Government's consultation process on overarching employment contracts of employment and eligible business expenses.

As part of the recently published Pre-Budget Report, it was announced that there was to be no new legislation and that employees of umbrella companies and recruitment agencies could continue to claim tax relief on legitimate business expenses. However, HMRC signalled its intention to step up compliance visits to ensure that Umbrella providers are complying with the law.

"We are delighted with the outcome of the consultation" says Managing Director Trudy Gordon. "We have committed much time and money to working with our advisors to ensure that all our offerings 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. We believe strongly that it is vital for the UK economy to retain a flexible workforce, and that it must be allowed to prosper in a tax-compliant environment.

Gabem's view is that 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," says Gordon. "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. Gordon added "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".

Background to HMRC decisions:
In the recent 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.

Further information:
Steve Girdler, Gabem Marketing Director

Note to editors:
Founded in 1998, Gabem Management Limited is one of the largest and most experienced providers of administration and contracting options for temporary workers across the country. Thousands of workers already benefit by being paid through the existing Umbrella Company option. The company has some 70 employees in two offices in West Sussex.