Wednesday, December 10, 2008

Inland Revenue launches clampdown on employment agencies

Inland Revenue chiefs are launching a new crackdown on construction employment agencies managing payrolls for thousands of contractors and workers across the industry.

The clampdown is the latest stage in an HM Revenue & Customs campaign against companies offering to slash tax payments for contractors.

The tax man is also threatening to chase after firms and individuals for back payments if they are found to be operating through companies that do not comply with legislation.

Hundreds of 'umbrella' and 'managed service companies' have sprung-up in the wake of CIS tax legislation.

They act as intermediaries between workers and companies allowing individuals to claim they are self-employed. They are also widely used by labour agencies to handle the payroll of people on their books.


Inland Revenue launches clampdown on employment agencies


But revenue chiefs believe many are little more than tax dodges, with only a handful complying with strict guidelines.

HMRC officials will now be challenging the legal status of agencies they believe are flouting the law.

A spokesman said: "HMRC will now look for suitable cases to investigate and, where appropriate, challenge and litigate."

Martin Hesketh, managing director of Brookson, which had its system approved by the Revenue, said: "A variety of models and structures have been introduced designed to circumvent the legislation.

"This shows that HMRC is aware of these attempts to frustrate the legislation and is now clearly targeting these structures."

Payroll companies have been trying to keep one step ahead of HMRC for years.

The Revenue launched its last crackdown in April 2007 to coincide with the introduction of new CIS. But since then, companies have continually tried to get round the legislation by adapting their structures.

Tax expert Carolyn Walsh of CWConstruction said: "There are always people who will try and dodge the rules, but the Revenue is gradually weeding them out.

"Bona fide contractors, nominee companies that handle workers' payments legitimately, and the companies that use them to pay or supply labour, have nothing to worry about."

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