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UK – Government responds to “difficult” taxation issues for recruiters

24 December 2012

The Recruitment and Employment Confederation (REC) has received an official response from the Treasury minister David Gauke on key taxation challenges facing the recruitment industry, but uncertainty over the much-debated travel and subsidence schemes remains.

Under these schemes, recruitment companies use some of the workers’ weekly salaries as expenses which have then been claimed as tax relief. “We would have welcomed a clearer steer on [the] schemes and will be taking this up with government early in the New Year,” the REC said.

In his letter to the organisation, Mr Gauke said that HMRC had specialist teams in place to investigate the travel schemes.

“This doesn’t tally with what many REC members are seeing on the ground which is why we will continue to drive for clarity, consistency and effective enforcement in this area. We have advocated the establishment of a specific working group on this issue and recently met with senior HMRC officials to discuss possible ways forward,” the REC said.

The REC has also called for more clarity and better enforcement of taxation rules. With regards to offshore intermediaries, the minister confirmed that the government “will be considering both its operational and policy responses to schemes being operated in this area” and will be taking action to stop “contrived and artificial avoidance”.

A major concern for recruiters over this year has been proposed ‘controlling persons’ legislation that would have limited the viability of contractors and interim managers in senior roles. Mr Gauke pointed to the recent confirmation in the autumn statement that this legislation will not go forward, although this was an area “the government will keep under review."

REC chief executive, Kevin Green, said: “We have been knocking on the government’s door for a while on a series of difficult but hugely important taxation issues. Our persistence has paid off and we are seeing some positive signs in terms of policy changes and a commitment to effective enforcement. We will remain at the forefront of these issues in 2013 as we strive to deliver much needed clarity and consistency to ensure that businesses in our sector operate on a level playing field.”

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