HMRC have issued a new press release on 6 August regarding their concerns about intermediaries offering services to pay temporary workers (such as umbrella companies).

Due Diligence

They have also published a ‘Due Diligence‘ guide for companies who use umbrella companies and other ‘labour provider’ intermediaries.

What agencies must do

In the guide, HMRC claim that it is the agency’s duty to check the operation of any intermediaries they use to pay their workers or face losing ‘the right to reclaim vat’.

Examples of such checks include:

• is the labour provider registered and operating in the UK?
• what is the directors background (ie. are they professionally qualified)?
• do they have employers liability insurance (have you seen the certificate)?
• do they guarantee to pay the National Minimum Wage (NMW), especially where expenses repaid to workers would otherwise reduce their salary to below the NMW?
• do they conduct statutory ‘Right to Work‘ checks?
• do they pay ‘self-employed’ workers rather than through PAYE?
• do workers have employment contracts?
• do they pay expenses to workers without sight of receipts (ie. through dispensations)?

“HMRC are obviously fed-up with employment businesses using non-compliant labour payment services – ignorance will no longer be a defence.  In this latest press release, they now expect employment businesses to complete a certain amount of due diligence or suffer the consequences:  ‘(agencies) will lose the right to recover vat’. ‘ When you consider this in conjuction with the new construction clampdown, they obviously mean to focus more on agencies in the future.”  iBalance