Exchequer Solutions moves to reassure recruitment agencies of their responsibilities as employers following the introduction of new tax legislation on 6 April 2014.
With up to 3,000 calls each day to the company’s Chester headquarters on compliance and tax issues, Exchequer Solutions has written to clients to spell out the key changes they now face. Mike Lowndes, our operations director, answers the key questions asked by callers.
So what are the changes to CIS?
HMRC feels there are a number of contractors in the UK who are ‘falsely self-employed’ and therefore avoiding the appropriate level of PAYE tax and National Insurance. HMRC has been arguing this case for years and has often lost in court. HMRC has therefore changed the rules so that more contractors are likely to be considered “not self-employed” and so creating a greater tax intake for HMRC.
What are the differences between CIS and an umbrella company?
CIS is the construction industry scheme for taxation. If a contractor is self-employed and working within construction industry they will be taxed at 20% by the company engaging them and will be responsible for their own NI and year end tax return.
An umbrella company employs people and pays them a low salary (hourly rate) and business expenses. The salary is subject to PAYE and NI whereas the expenses are, by definition, tax free.
Financially the difference is in the tax treatment after that the umbrella has employees whereas the CIS contractors are self-employed.
Why are you getting between 2,000 and 3,000 calls a day to your helpline – haven’t recruitment agencies known for some time that the new regulations would be introduced?
The legislation was ultimately brought in at very short notice even though it was proposed for some time. Many agencies assumed it would be delayed and therefore weren’t prepared for the changes to happen so quickly. Also opinion on the legislation is mixed, meaning that some companies are simply following the crowd and making last minute decisions.
Could this have been handled better by HMRC?
More clarity on the legislation would be useful as would have been a longer timescale for implementation to allow time for adjustment.
If recruitment agencies are not sure of the right steps for them now what should they do?
Obtain independent tax advice. Or call us and we’ll put them in touch with our tax advisors.
How do recruitment agencies get more information?
We are here to help, so please call us on 01244 500195
