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Chancellor George Osborne yesterday updated MPs on the state of the economy and the government’s future plans in his Autumn Statement. The included announcements which are expected to have an impact on the UK staffing industry, including the following clauses:
1.305 - Significant progress has already been made over this Parliament to tackle the avoidance of employment taxes by combating disguised remuneration, avoidance by Employee Benefit Trusts and ensuring the correct income tax and National Insurance Contributions (NICs) are paid by employers and employees when offshore employment intermediaries are used. At Budget 2013, the government announced that it would continue to gather evidence about the avoidance of employment taxes to inform future policy decisions.
1.306 - As the next step, Autumn Statement 2013 announces action to prevent employers and employment intermediaries from avoiding employer NICs and circumventing their employer obligations. The government strongly supports enterprise and those who choose to work for themselves, and believes that the tax system should continue to recognise the additional risk someone who is genuinely self-employed takes on. But the government is acting now to level the playing field so that companies cannot use employment intermediaries to disguise employment as self-employment and thus avoid employment taxes and deny employment rights to their workforce. The government will legislate to prevent employment intermediaries from being able to use contrived contracts to disguise the employment of workers. This will take effect from April 2014 and raise around £400 million each year.
2.129 - Employment intermediaries facilitating false self-employment – The government will amend existing legislation to prevent employment intermediaries being used to avoid employment taxes by disguising employment as self-employment. The government will consult on strengthening existing legislation to ensure the correct amount of tax and NICs are paid where the worker is, in effect, employed, with effect from April 2014. (Finance Bill 2014) (35).
Law firm Osborne Clarke commented: “As predicted by us, the Chancellor has announced plans to attack intermediaries in the staffing supply chain, and false self-employment, with legislation coming in as soon as April 2014.”
“The Offshore Intermediaries legislation comes into force in 2014, which will in practice require MSPs (Managed Service Providers) and staffing companies to be completely sure, if they are to avoid liability, that umbrellas and possibly Personal Service Companies, are not paying their workers offshore. Our view is that the government may struggle to produce, in such a short timescale, anything which is both effective on a widespread scale and politically acceptable,” Osborne Clarke concluded.
APSCo responded to the announcement by stating: “In simple terms the proposal is to remove the obligation for ‘personal service’, which is currently required for a contract to be considered an agency contract. According to Sarah Radford of HMRC, they believe a large number of people are being treated as self-employed, when in reality they are being employed. She was clear that where workers are genuinely self-employed then this model will still be appropriate.”
“Worthy of note during his speech were George Osborne’s comments that “Businesses have already created three jobs for every one lost in the public sector” and that “3.1 million new jobs to be created by businesses by 2019. Unfortunately, he didn’t mention that part of this growth in jobs is down to the flexibility provided by the professional recruitment industry, which allows companies to use expertise when necessary to produce growth,” APSCo concluded.
Professional umbrella employment provider, giant group, welcomed the government’s commitment to tackling national insurance and tax evasion. In today’s announcement, Chancellor George Osborne declared the government would ‘strengthen efforts’ to tackle intermediaries disguising employment statuses and avoiding national insurance and employment tax payments.
As outlined in the full Autumn Statement document: “The government will legislate to prevent employment intermediaries from being able to use contrived contracts to disguise the employment of workers’.
Addressing this issue is a step towards better employment practices, as Matthew Brown, Managing Director of giant group explained: “We have long supported initiatives which help to eradicate any potential loopholes – legal or otherwise – and encourage fairer working opportunities. We look forward to hearing more on the government’s crackdown on offshore employment and tax evasion.”