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UK – Recruiter tax scheme a mess

22 October 2012

BBC Radio Five Live last night focused on “non-compliant expenses schemes” for agency staff who receive travel and subsistence expenses. Under these schemes, recruitment companies use some of the workers’ weekly salaries as expenses. These expenses have then been claimed as tax relief.

The programme alleged that, in many instances, expenses have been inflated in order to mitigate tax and national insurance and that the savings were being shared among staffing companies and umbrella firms rather than being passed on to the temporary workers. The programme cited examples of temporaries being put onto schemes and ending up with a lower take home pay.

Some temporary workers also claimed that they had no choice but to join such schemes and were now being chased by the Inland Revenue for underpayment. The HMRC also confirmed that a number of employers were under investigation.

Adrian Gregory, a director at Extraman Recruitment alleged that the system was being completely abused and that there had been a rush of agencies to implement expenses schemes in order to compete in the market.

In response, the Recruitment and Employment Confederation (REC) commented today that “this started out as a legitimate HMRC scheme but has morphed into a mess. HMRC must do more to investigate complaints, apply the law and ensure a level playing field for all recruiters. The current lack of enforcement puts recruiters who abide by the rules at a disadvantage and could lead to workers missing out on benefits and the treasury losing out on tax revenue.

“Employers also need to make a stand. They are demanding ever cheaper labour and need to change their behaviour. They should look closely at their supply chains and refuse to work with agencies and payroll companies who run schemes that bend the rules.”

Kevin Barrow of law firm Osborne Clarke told Staffing Industry Analysts what he heard last night “was not very insightful or new but no doubt shocks many”.

Full details of these arrangements and potential action by the tax authorities were covered in Staffing Industry Analysts’ Daily News in July.

To listen to the programme, click here.

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