Below is a guest post by Gary Butterworth of Zeva provides an interesting discussion on the changing relations between agency and umbrella companies.
Where it started…and the rise of compliance…
Historically, agencies chose payment providers solely for financial gain rather than for the benefit of the worker, often without any regard as to the legal niceties involved.
With the advent of Transfer of Debt legislation, agencies are starting to take a greater interest in the workings of the Umbrella and Subcontracting companies. Now it had become a matter of personal risk.
As a company we invested heavily in compliance, and at times wondered if we had backed the wrong horse. But slowly and surely, more and more agencies are endeavoring to ensure that their providers are compliant, knowing that any charges for underpayment in tax, may eventually end up on their doorstep.
Unfortunately there is no kite mark in our industry, and very little guidance is given by the HMRC, or even the REC. Agencies are struggling to discover just what good practice is, and how to make sure their provider is actually doing what he says he does?
Times are hard in the recruitment industry, but it’s even harder at the moment for the taxman. It isn’t going to take long for him to realise that there is a fix going on, and he isn’t getting all the money he thinks he deserves. In time there will be some high profile cases, and examples will be set.
Many of our customers have sensed this change in the wind and are keen to make sure that they are not the example. We work very closely with our customers, and where in the past they felt safer in ‘not knowing’ now an increasing number sleep better in their beds in the knowledge that proper compliance is not just offered, but can be proven on a day-to-day basis. After all there are not many Umbrella or Subcontracting companies out there that say they are not compliant, so make them prove it!
There are benefits to both the agency and the worker using a company such as ourselves, but only if that company acts within the rules. Step outside these rules, and it just becomes a tax evasion scheme, and ignorance will be no excuse.
In the next couple of years we predict a reduction in the number of providers in our field, with the demise of the less stringent. Non-compliance is not a long term strategy.