That was the message given to a large gathering of senior representatives of the recruitment industry at a recent seminar organised in Central London by JSA, specialist Chartered Accountants for freelancers and contractors.

JSA’s Chief Executive, Barry Roback, emphasised that providing agencies ensured that their procedures for determining a Preferred Supplier List (PSL) were based on compliancy rather than profit or gain, it is unlikely that they would fall foul of the MSC legislation. Agencies cannot bury their heads by abandoning their PSLs any longer. They have to take responsibility for ensuring that their contractors are compliant, as the HMRC is clearly determined to continue to target tax and NIC evasion within the recruitment industry.

HMRC
Robin Wythes, HMRC’s PAYE & NIC Group Policy Adviser, who is responsible for IR35 and MSC legislation, supported his view.

Mr Wythes stressed that the purpose of the legislation was to target those who were working through limited companies in order to avoid tax and NI.

While he emphasised that the legislation was not aimed at those genuinely working on their own account, he admitted it was sometimes difficult for a third party to tell whether a contractor could legitimately work through a personal service company, although the acid test should always be the nature of the work that was actually done and how it was carried out.

The thrust of Mr Wythes’ message was that while reputable agencies had nothing to fear, the fact remained that there were still a number of instances where agencies and/or end users were dictating inappropriate arrangements to contractors. These cases had to be investigated to see if they were a ruse to avoid tax and NI.

Accreditation
He also confirmed that HMRC had no plans to introduce accreditation of service providers but that it was not true that it was ditching the idea of an MSC Audit Standard. However, legal problems still needed to be resolved – for example, HMRC does not have the statutory powers to absolve anyone from the transfer of debt provisions.

Mr Wythes also underlined that HMRC would still like to have a MSC Audit Standard for service providers, but that it would not be obligatory and would be more of a 'framework', which would then allow suitably qualified people to access compliancy against its terms. Details of the criteria have yet to be pubished by HMRC.

He concluded by saying that his Department was keen not to affect the flexibility of labour market but that he was aware that the new legislation had created problems in the recruitment sector, even though agencies had nothing to fear if they were compliant with the law.

As a parting shot, he warned against offshore companies that advertise extensively on the Internet. He said: “If tax is payable in the UK, going offshore does not necessarily exclude your contractors from liability. If you deal with candidates working offshore, caveat emptor!”

Professional Passport
Crawford Temple, founder of Professional Passport, then explained how his new organisation could deliver MSC compliance for agencies in a practical and cost-effective way.

He said that Professional Passport had been established to assist agencies in dealing with the ever-increasing complexity surrounding the supply of contractors to end-users. Professional Passport would keep agencies up to date with legislation, protect them from debt transfer rules, manage PSLs, carry out contract status reviews, provide ‘no risk’ Contractor PI insurance and offer access to specialist advice on HR and employment law.

He said that all agencies had one major objective – getting their contractors into work as quickly as possible and that Professional Passport’s services were designed to achieve this.

He underlined the message given by Barry Roback and Robin Wythes. Crawford Temple said: “If you apply good commercial procedures and meet legislative requirements, there is no reason why you should have problems. Just bear in mind that it is not sufficient for you to accept the reassurance of service providers that they are fully compliant. Professional Passport is designed to carry out compliant checks for you and to avoid the need for you to employ expensive time carrying them out yourselves.”

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Susie Hughes
The Editor © AgencyEye 2008