HMRC hits contractors’ agencies with tax bills

Contractors’ recruitment consultants are receiving demands from HMRC, in the first sign that the taxman is enforcing the Criminal Finances Act 2017 against staffing agencies.

The Freelancer and Contractor Services Association says the consultants received ‘incentive’ payments from one or more umbrella companies and that “no tax was paid on this income.”   

And a failure to declare what the consultants received, which could include vouchers or other benefits-in-kind, may breach a tax evasion offence effective since September, FCSA said.

Worryingly for such agencies’ senior management teams, their members not being either aware of the incentive payments, or directly involved, means their agency can still be liable.

Potentially more worrying, those targeted by HMRC so far are “likely to be just the tip of the iceberg,” FCSA said, partly, it seems, as incentive payments can be made by accountants too.  

“If your staff accept monies, vouchers or any other benefits in kind from an umbrella or accountancy provider it should be treated as taxable income,” the association said.

“In order to protect supply chain partners from an unexpected tax bill... appropriate tax [must be] paid on any incentives paid to recruitment businesses or their staff.”

The disclosure that HMRC is probing agencies over fresh evasion rules is likely to prompt businesses to ensure their partner-firms in their PSLs are aware of their tax obligations.

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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