The failure of HMRC to respond to a letter from lawyers representing the Association of Recruitment Consultancies (ARC) concerning the Apprenticeship Levy has prompted the trade body to launch a campaign to amend the proposed charge on recruitment agencies’ payrolls.

ARC Chair Adrian Marlowe described the inclusion of recruitment agencies as entirely unfair.

As with other employment intermediaries such as Umbrella Companies, recruitment agencies supplying contracting professionals to end-clients have artificially high payrolls. The levy will apply to contractor/agency worker paybills (earned by delivering skills and services to an end-client) in addition to the intermediaries’ own in-house staff payroll. No other types of businesses will have their annual turnovers counted as leviable payrolls.

Objecting to this unfairness, the ARC has sought advice from leading counsel. Its own investigation found a lack of transparency from the Government both during and after the technical consultation on the levy. As a consequence, ARC lawyers wrote to HMRC on 23rd November seeking clarification as a matter of urgency, as further legal consideration will be needed on the response (the letter can be read here).

The specific issues raised in the letter concern the assessment that the Revenue has made of the levy’s impact on recruitment agencies, given the absence of any formal impact evaluation in the consultation documents. As Mr Marlowe observes, it is customary for impact assessments to be made, and the ARC wishes to know why they weren’t on this occasion.

The letter also raises concerns regarding what appears to be a failure on the part of the Government to adhere to its own published consultation guidelines.

The ARC wants to find out exactly what happened in the lead-up to the consultation and during the consultation itself. Specifically, it seeks clarity on how the decision to apply the levy to “large employers” was stretched by the Treasury to encompass the paybills of workers supplied by intermediaries to end-clients (who actually pay the money).

The trade body considers it vital to know which recruitment stakeholders were involved in the decision and what was said, as this industry has been largely unaware of the serious impact that the levy will have.

HMRC declined to disclose further information at this stage and says that it will not do so until 16th December – narrowing the window to take corrective legal action to a mere three days (the deadline is 19th December).

Mr Marlowe concluded: “Ultimately the Government may welcome our campaign and the steps we are taking, the purpose of which is not to frustrate the idea of encouraging apprenticeships, but instead to help the Government do so in a fairer and more effective way.”

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