The week that started with the implementation of Onshore Intermediaries Legislation has ended with the condemnation of the Elective Deduction Models (EDM) that have been mooted as the latest legal loophole.
The EDM is being “marketed in various forms as a method of classifying workers as self-employed for employment law purposes, but employed for tax purposes.” Using this combination of status the aim is to cynically side step the new onshore regulations. As well as a vehicle of avoidance to circumvent National Minimum Wage requirements, Agency Workers Regulation (AWR) and auto-enrolment, probably the most bizarre aspect of industry reports about EDM, is that it is the industry that is urging HMRC to intervene and curtail the practice of this dodgy model. This is disappointing on two levels; that apparently HMRC was not even aware of the model and that it is the recruitment industry that is self-regulating on the matter, an option that was not afforded to it when the Government decided to consult on False Self-Employment.
We have said as much about HMRC’s inability to join up the dots before in providing a set of clear, simple and precise regulations that compliant agencies can understand and implement, but seemingly in its pursuit of its missing taxes, HMRC doesn’t hold either recruitment agencies or even workers in good sway.
Our own advice remains the same to agencies that are faced with making adaptations to try to accommodate this new legislation:
- Buyer beware; outrageous models to limit tax obligations should be treated with scant regard
- Review the range of compliant options that are available
- Take time to review and understand the legislation and what it means
- Consult the necessary tax and legal experts
- Act accordingly base on your own circumstances
According to Kevin Green, REC CEO: “Any model that markets the evasion of NMW and AWR as key selling points has no place in our industry, and any business reliant on such unstainable models for survival is not the sort we want or need in our sector. These models fundamentally undermine compliant recruitment businesses and we expect HRMC to take swift, decisive action against this and any future models that so profoundly distort the otherwise professional recruitment market.”
We couldn’t have said it better.
