HMRC has published new guidance on its Onshore Employment Intermediaries – False Self Employment consultation document, with the guidance also covering draft offshore employment intermediaries legislation.

While it seems clear that responsibly-run UK Umbrella Companies will be unaffected by the proposals due to their adherence to  Revenue-compliant PAYE payment systems for their employees, Adrian Marlowe, chairman of the recruitment industry trade body Association of Recruitment Consultancies (ARC), has raised new concerns about the exercise.

Specifically, Mr Marlowe fears that legitimate businesses designated as personal service companies by HMRC may be unfairly and inaccurately snared in the Revenue’s determination to tackle tax avoidance through false self-employment schemes, despite assurances in the consultation document that genuine businesses will not be targeted.

Conceding that some forms of engagement were being used to dodge tax and that HMRC is right to tackle such schemes, Mr Marlowe went on to warn that, as the draft proposals currently stand, they “have a wide ranging scope potentially beyond the extent HMRC has stated that it intends”.

Should this over-inclusive scope persist into the final legislation, he cautioned, genuine business-to-business arrangements will be caught in the crackdown in addition to illegitimate false self-employment models and other tax avoidance schemes.

“As such,” Mr Marlowe said, “it is game changing for the supply of contractors within the recruitment industry.”

Confirming that the ARC would submit proposals to HMRC as part of the consultation after a thorough legal analysis, he added: “We hope that the scope can be limited appropriately and that the arrangements should not be overly burdensome to agencies.”

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