The Times has today warned freelancers who engage with tax avoidance schemes that they will be hit with an enormous tax bill in the light of HMRC’s controversial loan charge coming into effect from April 2019. Freelancers involved in such disguised remuneration schemes have until 30 September 2018 to contact HMRC to seek a settlement, or face very significant financial penalties.
Julia Kermode, chief executive of FCSA, the UK’s leading professional membership body dedicated to raising standards and promoting supply chain compliance for the temporary labour market said:offered the following advice to recruitment businesses:
“The Criminal Finances Act (CFA) makes companies criminally liable if they fail to prevent tax evasion by a member of staff or an associate and prosecution could lead to criminal conviction and unlimited fines. Therefore, in light of the proliferation of tax avoidance schemes that are popping up and capitalising on the IR35 changes in the public sector, recruiters must ensure that their supply chain is not facilitating tax avoidance. A recruiter’s good business name could be dragged through the mud, damaging their relationships with clients and candidates in the process.
“I would therefore urge recruiters to ask these 3 simple questions of every supplier on their PSL:
- Is the company you pay the same one that pays your workers?;
- Do you know that they are not contracting with any entity outside of the UK?;
- Do you know the supplier is paying the correct VAT, PAYE tax and NI to HMRC?
If the answer to any of these is NO, you must tighten up your PSL.
Remember, sometimes things aren’t what they seem, so we would suggest you choose a member of an accredited professional body to ensure that some compliance checks have been undertaken. Make sure you know what the accreditation means in practice, as standards can vary.
“Ensure that the employment intermediaries on your PSL operate within the law and provide:
• 100% of contractors’ gross wages paid through RTI payroll
• National minimum wage payments in line with legislation, paid in full as the contractor’s salary
• Holiday and statutory payments such as sick pay and maternity/paternity pay
• An overarching contract of employment
• The provision of guaranteed hours
• Access to a workplace pension
• Full employment rights
• If expenses allowances are too good to be true, then alarm bells should ring – they may not conform to HMRC legislation and guidance