EXPERT SERVICES

FOR THE RECRUITMENT INDUSTRY

£1M Penalty For Agencies
Promoting Tax Avoidance?

No Myth Or Sales Hype

Offshore Schemes, Loan Schemes, Trusts, Managed Services Companies Schemes, Pay-day-by-Pay models, or similar hybrid models that disguise employment are all non-compliant.

If you have introduced any of your contractors to any company in your supply chain who subsequently ‘signs-up’ your contractor to any form of disguised employment, then you are at risk.

The grey areas around ‘who is a promoter?’, ‘who is an introducer?’, ‘who is a marketing contact?’ are becoming clearer and a genuine risk to agencies.

This is not a myth or sales hype; it is a fact you can read from the following HMRC websites:

Disclosure of tax avoidance schemes penalties

Tackling promoters of tax avoidance

New proposals for tackling promoters and enablers of tax avoidance schemes

To reduce your risks, make sure your umbrella provider has been accredited by a trade association specifically for the provision of umbrella services.

There are many trade associations for suppliers to the recruitment industry to join in order to showcase their credentials. When assessing your PSL it would be beneficial to check any associated memberships are specifically for the services you require, as typically a membership logo does not cover all services provided to you.

What Is IR35 And Why Should You Care?

Just in case you missed it, here’s our quick guide to IR35:

  • IR35 is the HMRC’s anti-tax avoidance legislation.
  • The new changes require contractors who are working in the same manner as an employee to pay the same Income Tax and National Insurance Contributions as other employees.
  • The new legislation is designed to prevent contractors, who are essentially working as employees under a Personal Service Company (PSC) for example, from avoiding tax by working under their own limited company.
  • The employer (end user) where the contractor is working, is responsible for assessing whether a contractor should be subject to IR35.
  • The fee payer (often a recruitment agency) is responsible for accounting and withholding the correct Income Tax and National Insurance on the contractor’s behalf.

 

This means that agencies who do not prepare for the changes could be caught on the hop, particularly those which are supplying workers via off-payroll arrangements or under complex labour supply chains.

But knowledge is power. And if you act now you will have a smooth move into the new IR35 in April.

Did you know that you can even start the transition process of moving contractors from PSC’s before the cut-off date, while keeping limited company status right up until the deadline?

What Are My Options?

Agencies have a few options when it comes to payroll:

  • In-house
  • Outsourced
  • Umbrella

Should We Keep Payroll In-House?

On the surface, keeping payroll in-house might look like a good idea. It’s always better to do things yourself, right?

Wrong.

Keeping payroll in house often comes at a high financial cost as well as having a huge impact on staff time.

To start, companies must absorb the financial hit of purchasing and implementing payroll software.

In addition, staff must be trained to use the software correctly so they can realise the benefits from it.

In the case of the impending IR35 changes, agencies need to decide whether their resources and systems will be able to cope with the increase in workload, and the complex decision making they will be tasked with.

What Are the Benefits of Outsourced Payroll?

Outsourcing payroll is a great option for agencies who want to save time, improve their standards, and reduce costs.

You can leave your payroll in the hands of experts, which leaves you and your staff free to focus on your company’s primary activity. This ensures that you are maximising your profits in every area.

There is also the increased accuracy and access to additional services and benefits that come with using a payroll service.

Outsourcing processes is usually a wise investment when compliance is involved, as it provides an added layer of protection against potentially costly mistakes. And that is certainly the case with IR35, where non-compliance might result in severe penalties.

Benefits of Payroll Outsourcing:

  • Timesaving
  • Access to payroll compliance experts
  • Increased accuracy
  • Access to services and benefits usually associated with payroll departments who have bigger budgets.

Taking the Umbrella Option

Using umbrella services is a great option for IR35 caught contractors; they will be taxed as an employee and there is minimal paperwork.

In addition, contractors working through umbrella companies have full employment rights and benefits, giving the contractor peace of mind and continuity of employment.

What are the benefits of umbrella to contractors?

  • Full employment rights, including holiday pay, pensions, and parental pay.
  • The stability and benefits of being employed while still having freedom and flexibility to move between contracts.
  • Continuity of employment history (helpful for mortgages and loans)
  • Earning consolidation

What’s Best for Me and My Contractors?

We at JMK understand the overwhelm that the IR35 changes are bringing to our clients.

Therefore, we urge you to make your payroll decisions now so that you have a smooth transition before the deadline.

HOW JMK CAN HELP YOU

We provide both payroll outsourcing and umbrella services and can advise on the right option for you.

Our exclusive comparator tool can help you choose the best payroll option for your agency and your contractors. It takes less than 10 minutes!

Our PSC Flex Service is designed for IR35-caught contractors with their own PSC who want to continue to work on contracts of their choice. PSC Flex allows contractors to process outside IR35 HMRC payments through their own company, while we take care of any PAYE payroll which is deemed inside IR35.

Remember – you can start your contractors transition now, and they will retain limited company status right up until the deadline. It’s free!

Talk to us to get the process started and relax knowing that you and your contractors are completely prepared for the deadline in April.

Stay safe and stay compliant!
The Team At JMK

Since 2002, JMK have been compliantly consolidating back-office, accountancy and payroll functions. 

We have evolved to provide a range of expert services; such as Professional Employer Organisation (PEO), or Back Office Support (BOS) or Funding, becoming a leading provider to the contracting industry.

We know every agency is different in some shape or form, even if only by a little, but important bit. Combining our knowledge and experience of multiple sectors enables JMK to support you all from recruiters and payroll, through to finance, compliance and management.

With JMK as your trusted partner, even the smallest team can process the largest payroll, regardless of payroll type.

Have a look at the wide range of services our Professional Employer Organisation (PEO) or Back Office Support (BOS) can provide to you and your business, it is far more than just payroll and finance.

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