Outside Agency Workers Regulations
It’s very easy to stay outside Agency Workers Regulations.
HMRC are cracking down on agencies who try to influence contractors to operate as Personal Service Companies.
If they are caught, therefore, they could be liable for their unpaid tax and national insurance says giant group.
It seems that HMRC reviews of suspected Managed Service Companies have risen by 71% in the past year. There have been 140 formal transfer of debt notices to companies and their directors.
Furthermore, at one agency HMRC are demanding £10m for transfer of debt.
No Mass Incorporations
Matthew Brown, Managing Director of giant group, comments: ‘The last thing HMRC wants is to lose millions of pounds in tax and NI through mass incorporations. It will therefore watch closely for contractors who are directed or influenced to operate through a PSC. They will challenge arrangements that it views as artificial.
‘The tax and NI lost (due to dividends etc) is, on average, £10,000 per limited company per annum. Just 100 workers equates to a £1 million ‘debt‘ over 1 year, plus interest and up to 100% penalties. So the financial risks are very significant indeed.’
HMRC Prefer Umbrella Companies
It‘s one more sign that HMRC and the Government would much rather see contractors in safe Umbrella Companies than in Personal Service Companies.
If agencies influence contractors to join Personal Service Companies they could be liable for the difference in tax for that contractor and all contractors they have influenced between what the contractor actually paid in his or her Personal Service Company and what he or she would have paid if they had paid tax and NI like a permie or Umbrella Company worker.
It looks like if you are outside IR35 then you are outside AWR.
Easy to Comply With AWR
Brown adds ‘It is easy for recruiters to comply with AWR. You simply have to ask the hirer two questions.’
‘If the temporary worker was employed by you, what would be their salary (overtime and bonus, if any) and days of holiday entitlement?
‘Agencies need to be very careful if they are thinking about advising contractors to use a PSC as a way of avoiding AWR.’