Recently I’ve been asking agency owners “are the upcoming changes to travel and subsistence putting your recruitment business at risk?” and have had a myriad of responses, as has my follow up of "do you understand the risk you will personally carry as a director of that business?"
If your recruitment agency provides any type of flexible labour in the UK, then these changes will affect you.
Having had a longer than expected christmas and new year break, I’ve spent the last week playing catch up and talking to a number of my clients and also some prospects about what they are doing to ensure that they are not going to see significant reduction in GP and NP, due to the double whammy likelihood that the world of ‘timesheet rebates’ is going to change with this legislation, coupled with the direct impact that the changes will have on bill and pay rates.
Transfer of Debt is the biggest elephant in the room for me. The watered down legislation is a little better that the ‘joint and several’ approach original mooted by HMRC, but you have to forget that the draft legislation will make the end user of temporary workers more responsible for the travel and subsistence reliefs applied by intermediaries with whom they engage. The reality is that in the first instance, the tax and National Insurance liability will rest with the employment intermediary and its directors and it will be up to them to demonstrate a fraud has occurred. Now I’m not sure how deep your pockets are vs. some of your large clients, but a protracted legal case would kill off 95 per cent of UK recruitment business.
I’m sure that with all the noise out there, much of it ‘sales pitch’ from umbrella land, then this topic will not be new to anyone reading this, but keep reading… as it may just make you stop and think about your planning for business in the 2016/2017 tax year. If you want a quick snapshot of where things are up to, I recently read a really succinct article that you can download for free from the Saffery Champness publication landing page . It really grasps the nettle and gets to the point.
OK, the dust is still to settle fully and the legislation is still draft and will not be clarified until February, but don’t leave it to then to start thinking about planning with your stakeholders. There will inevitably be a big change in the way that the recruitment sector operates and businesses will need to review their supply arrangements in light of the proposed changes
One thing that is guaranteed is that sitting on your hands right now cannot be an option. I am advising my clients and prospects alike to get out there and talk with their own legal advisors, importantly their clients and critically their contracting provider supply chain. I hate the old adage of “people don’t plan to fail, they fail to plan”, but never has it been truer than with this legislation. Reviewing current arrangements with providers and putting in place a robust process for engaging and reviewing suppliers has to be business critical and having them engaged and in place for the new tax year is imperative.
Compliant PSLs: For many agencies having a clean and compliant Preferred Suppliers List (PSL) covering employed/self-employed (Umbrella) and Personal Service Companies (Limited Companies) has been a nice to have. Many have followed best practice and put in place separate PSLs, but some have been driven more from a ‘timesheet rebate’ commercial angle than from the compliant angle of business risk. It’s the latter that must now surely take precedent.
It should be a significant selling point to the end clients that your agency has a compliant supply chain, one that protects both you and them from significant risks, but importantly if you don’t have enough knowledge in the business to go through this process then engage fully independent advice on this. Make sure you get a spread of advice as a sanity check and don’t believe everything that you read or hear.
So get everything ready to push the button on a fresh PSL process / PSL review process once the legislation is fully known and understood in February with a plan to implement that PSL in April.
There are bodies out there; FCSA, Professional Passport, Lawspeed, et al, who all have a standard but all I will say here is buyer beware, if a provider has one or all badges then it will not guarantee compliance at all. You must drill down and conduct your own due diligence. The message is clear, so don’t be taken in by some of the ‘compliance badges’ out there, some a merely a veneer that hide a multitude of sins. I have seen some of the badged providers out there switching huge blocks of workers this year from one model to the next and now to another, trying to be one step ahead of legislation and in many cases too cute for their own good. I think it’s a good idea to understand these types of bodies but don’t rely on their process to guarantee your safety should the HMRC knock at the door come. Likewise, it’s worth sounding out the likes or REC, APSCo, TEAM, et al, to get there take on such matters, see what they are saying and where they are steering and guiding their members… but again don’t take their preaching as gospel.