Offshore umbrella clampdown – new rules from April 2014
Following an initial announcement in Budget 2013 and subsequent consultation period, HMRC has announced that all workers employed by offshore intermediaries will be subject to UK taxation rules from April 2014.
Under revised proposals, the recruiter or employment agency (rather than the end user) will now be ultimately responsible for ensuring that all workers employed offshore pay the correct amount of income tax and National Insurance.
HMRC decided to strengthen existing legislation rather than create new rules to enforce the clampdown.
Alastair Kendrick, Tax Director at MHA MacIntyre Hudson, explained; “For the employee, it means they will see a significant decrease in their take home pay and may consider looking elsewhere for employment.
Kendrick said that employers would need to “urgently review” their contracts with recruitment agencies, to determine where the responsibility for deducting the correct amount of UK tax ultimately lies.
“Employment agencies should also be wary as they are likely to be the ones who will have to operate the PAYE and NICs – which is not only going to be an extra cost to them but also an increased administrative burden.”
Lisa Keeble, MD of Contractor Umbrella, said that recruitment agencies would have to put new procedures in place to ensure that they only use UK-based compliant umbrella providers;
“Any umbrella companies that they work with either indirectly or directly should be able to evidence that they pay full income tax and National Insurance contributions but it is inevitable that new processes will need to be put in place to ensure compliance.”
Simon McVicker, chairman of contractors’ group, PCG, said that his organisation supports the overall aims of the Government to clamp down on tax avoidance, however he would have preferred to see new rules drawn up “which address the potential for tax avoidance activity by companies engaging intra-company transfer workers.”
You can read the background to the consultation, and accompanying documentation via the GOV.UK site here
Latest IR35 Forum minutes published
HMRC has published minutes from the 1st August meeting of the IR35 Forum. The Forum is made up of HMRC officials, and wide range of industry experts, jointly tasked with overseeing improvements to the way IR35 is administrated.
At the August meeting, the group discussed the need to provide improved guidance on IR35, the general dissatisfaction with the ‘Business Entity Test’ (which ‘helps’ individuals determine the risk they face from an IR35 investigation), and even an open question about how the IR35 Forum itself could be improved.
You can download the minutes here (PDF).
UK’s leading umbrella reports best week ever
Parasol says it took on more new clients last week than at any time since April 2010, suggesting that the contracting industry is experiencing a significant recovery.
Derek Kelly, the company’s MD, attributes the surge in new joiners to a general economic recovery, which is, in turn, leading to an increase in contractor confidence.
Number of female freelancers rises dramatically
According to contractor accountancy provider, Crunch, the number of women working as sole traders has increased by over 20% since 2008.
The UK regions which have seen the largest rise in female sole traders are Middlesex and London (23.44% and 22.06% respectively).
The data was obtained via a Freedom of Information (FOI) request made to HMRC.