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There Will Be No More Loopholes, GAAR Will Get You, says HMRC

100 parliment Street HMRC

The HMRC are making BIG changes again that are going to significantly change the recruitment industry. The GAAR regulations (General anti-avoidance rule) are due next year, and Liberty Bishop were asked to attend a round-table event at HMRC, 100 Parliament Street to help them with feedback and opinion.

This is the first of a series of GAAR posts over the next few weeks, so make sure to subscribe to this blog over on the right, to make sure you don’t miss any.

So let me get started and share with you my round table trip to HMRC.

As geeky as it may sound I was excited to be going to a round table discussion at HMRC’s office. I was attending of course in a professional capacity as Director of Liberty Bishop Contractor Services, but also as a representative of the trade body ‘All umbrella companies are equal’.

It was a blistering hot day, which of course meant an unwelcomed stuffy tube ride to Westminster. I arrived early as planned, it being Big Ben’s territory in the summer it was going to be busy! I got my takeaway coffee and had a stroll up Whitehall (yes doing my tourist bit) to find 100 Parliament Street, which was pretty easy it’s literally just down the road from 10 Downing Street and across the square from Big Ben.

As you would expect from HMRC it was a very systematic check in (if only all their systems were the same), anyway being told to wait in the grand entrance was in comparison to being told to wait outside the headmasters office!

All present for the meeting were again checked at the turnstiles and lead to the meeting room (I won’t go there with the impressive architecture and stained glass windows up the staircase!). Initial let down it was not a ‘round-table’ it was square – and not that grand to be honest. A quick introduction around the room to find who was who – with representatives from Deloitte, independent accountants and personnel from 2 of the top 20 recruitment firms.

What was it all about? “Offshore Employment Intermediaries” consultation was the hot topic of the day.

I was keen to speak with HMRC about this subject, not only as a business that comes up against tax dodging schemes on a daily basis, but also as a tax paying individual like you and I. It’s been a personal gripe of mine that individuals have been getting away with paying little or no tax for years. Don’t get me wrong we all begrudgingly pay tax, but it’s one of the certainties of life – the other doesn’t bare thinking about!

The discussion was mainly led by HMRC with their current outlook on the situation and how it operates in the real world and ultimately how they aim to stop it. With myself and others questioning the processes and procedures. At points it did get highly technical with specific tax legislation being cited and referenced.

The basics: What do you need to know?

As mentioned this is our first blog on the subject as the consultation period has only recently come to a close 8/8/13, we will be issuing further documentation whilst in its current form leading up to the release of the final paper due in the Autumn 2013, with the view of this legislation going live in April 2014.

Recruiters: You have a lot to pay attention to, never has there been a more imperative time that you need to engage with a compliant UK umbrella company. If it has been found that one of your contractors has not paid tax you as ‘intermediary 1’ in the chain – i.e.: the company engaged with the end user will become liable for the tax.

No longer can an indemnification clause in the contract be in place and protect. Not only will you the recruitment agency have a duty of care in how the contractor is working their monies, the end user (the client) will also have an interest as they could also end up in the firing line – as with this legislation the tax liability is going up the chain.

“Indemnification” – It’s an interesting phrase, and pretty much an industry standard clause – Yes a compliant UK umbrella company such as Liberty Bishop is more than happy to “indemnify” you (the agency and client) but this is NOT the problem.

As an agency if you currently opt NOT to refer any 3rd party provider, you will still have an obligation to ensure that the individual is working compliantly.

Sorry to be the bearer of bad news but don’t shoot the messenger – The bigger picture is that this is good news for the economy and those who have not paid their dues to date will 100% have to change.

General Anti-Avoidance Rule (GAAR) has big shining teeth and it is coming in force in 2014, it’s BIGGER than IR35 – contractors watch this space …

 

 

 

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