Parasol is calling for the introduction of standardised reporting criteria, in order to enable compliant employment services providers to demonstrate their legitimate onshore status to staffing firms.
The call for clarification follows a consultation on proposed legislation, due to come into force in April 2014, designed to clamp down on tax avoidance by offshore umbrella companies. (See: Government clamps down on offshore employment intermediaries - May 2013, Shout99).
Parasol managing director Derek Kelly welcomed the proposed measures, but stressed the need for clear guidance from HMRC on how recruiters should check an umbrella’s tax status.
He said: “As a UK-based company committed to raising standards in our sector, Parasol is strongly in favour of all efforts to combat tax avoidance by unethical offshore umbrellas. Indeed, in the past I have called for the directors of such companies, along with their personal assets, to be pursued directly by the authorities.
“The proposed legislation represents a significant step forward in the fight against offshore tax avoidance, but as always the devil is in the detail.
"As things stand, the legislation doesn’t set out one single, approved means by which we can prove to our agency partners that Parasol is based onshore and pays all relevant PAYE tax and National Insurance contributions (NICs).
“There are certain key indicators, such as a PAYE tax bill, that an agency can use to gain an insight into a provider’s tax status.
“However, the danger is that agencies will develop myriad bespoke methods for compliance checks. We work with more than 2,500 UK recruitment firms, so it’s perfectly feasible that – without further guidance from HMRC – we’ll be facing at least 50 different reporting criteria.
“In theory the legislation should benefit compliant, UK-based providers such as ourselves, but at present we’re concerned that it will create administrative chaos for us and our agency partners.”
Further guidance on the offshore umbrella legislation, which aims to close a tax loophole estimated to cost the Exchequer around £100m a year, is expected this autumn.
Parasol is the latest member of the contractor recruitment supply chain to express concern over the finer points of the draft law, while welcoming its broader aims. (See: Welcome for clampdown on offshore employment intermediaries - June 2013, Shout99)
Trade body APSCo has warned that the legislation could place an “unreasonable burden” on the recruitment industry, while John Chaplin of Ernst and Young believes recruitment firms will face “a horrendous amount of administration” if the proposals become law.
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Susie Hughes © Shout99 2013