New UK government legislation aimed at cutting tax avoidance may become an administrative nightmare for companies providing staffing solutions, according to an industry insider. John Chaplin is head of global employment tax services at professional services firm Ernst & Young, and claims that the new rules will cause businesses to take on an extra workload that “is out of all proportion to the tax lost”.

At present, it is thought that the exchequer loses around £100m per year through businesses or self-employed individuals who fail to meet their full tax costs. The new law, which will come into force from April next year, is set to put a halt to one of the ways in which companies circumvent meeting their tax payments. It will target offshore employment intermediaries who avoid paying national insurance contributions and PAYE from the pay of their UK workforce. This can currently be done within the law, as the workers are not employed by a UK concern.

Mr Chaplin argues this new law will cause “a horrendous amount of administration” for all agencies, not least because they will need to know which of their workers are employed by overseas intermediaries. In a statement, however, HMRC claims that it only foresees “a small increase in the administrative burden” for Umbrella Companies.

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