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New anti avoidance legislation has been introduced by the Government in a bid to crack down on national insurance (NIC) avoidance. The new legislation refers to the issue of ‘false self-employment’, and aims to prevent agencies that provide construction and other agency workers through employment intermediaries from avoiding Employers NICs. Previously there was a loophole which allowed agencies to legitimately avoid making these payments where the workers’ contract contained a substitution clause.
Whilst the avoidance of NICs in this way was always open to challenge by HMRC it was a very grey area that was difficult to prove; the new legislation makes it much easier for HMRC to police and removes any subjectivity on the issue. Essentially a worker need now only be personally involved in the provision of services for PAYE and the requirement for payment of employers’ NICs to be triggered.
It is likely this will mean that costs will increase where agencies seek to pass on the cost of the NICs they are now required to pay. There may be a further hidden cost for those businesses that use less reputable agencies, as they may find HMRC coming to them for any unpaid employers’ NICs that are deemed to be due and which they are unable to collect from the agency because it has ‘disappeared’.
If you would like to discuss any of these changes in more detail please contact Anne Eager by emailing ae@rjp.co.uk
For more information visit: http://www.hmrc.gov.uk/news/news240314.htm
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