HMRC has started to target recruitment consultants in the first sign that they are in violation of the Criminal Finances Act 2017.
These consultants are expected to have received ‘incentive’ payments from multiple non-compliant umbrella companies, whereby no tax was paid on their income.
The Freelancer and Contractor Services Association (FCSA) state that a failure to declare money which consultants receive, such as vouchers or benefits (of any kind), is likely to be breaching a tax evasion offence which came force last September.
For such agencies, regardless of if the senior management team were unaware of these of these ‘incentive payments’ (or if they were directly involved), the recruitment agency themselves will be directly liable.
More troubling is that those caught by the HMRC so far, are “just the tip of the iceberg” states the FCSA, suggesting that incentive payments may be practised by accountants as well.
A statement by the FCSA summarises the way incentive payments will be regarded by the HMRC – “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,”.
Further, the FCSA states “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”
It is likely that the HMRC is probing agencies over evasion rules due to prompt businesses to ensure their partner-firms are aware of their tax obligations.
For more information on the Criminal Finance Act 2017, get in touch with a member of the New Business team on 0800 276 1576, or alternatively email firstname.lastname@example.org.