HMRC's Latest Guidance - What you need to know to stay compliant

On 30th November 2023, HMRC published updated guidance for users of outsourced employment services, entitled 'Responsibilities for employment businesses working with umbrella companies'

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Borderless always views such activity from HMRC with interest - although we are not an umbrella company in the traditional sense, following any best practice as outlined by HMRC ensures the highest level of security and compliance for our customers.

This guidance is split into four main headings, and below we have picked out some of the key points, along with some helpful detail on how Borderless keeps you compliant:

We are experts in employment and tax laws in all the locations we work in. We know the rules, and always stay on top of the changes, so you don't need to worry about them.

Working Within the Law

Agency Workers Regulations 2010: When we introduce you to a supplier, we vet their policies and processes for AWR treatment. Our proprietary software ensures that once a worker reaches week 10 of their assignment, a prompt is created to check that the correct enquiries have been made, and that the correct pay and treatment will be applied once week 12 is reached.

• Quarterly Intermediaries Return: Due to the simple nature of your supply chain when using Borderless, this is provided seamlessly, and can be produced at any point upon request

• Overseas companies, employee incentives and business incentives: We will only introduce you to carefully selected UK partners, where we have completed full due diligence (more on this later). Our stringent checks ensure that your workforce do not receive any cash incentives and are treated in a very simple PAYE employment manner. With regard 'business incentives', this is a practice which we have seen misused over the years to attract customers. Our suppliers will be delisted if any 'incentives' are offered as we feel that this may promote uncommercial or unsafe decision-making

Supporting Workers

This is simple - we only operate PAYE based employment, and we do not charge a fee to the worker. Therefore, the pay rate and employment type is consistent with that they would receive if engaged directly.

It's important to note that this document re-iterates the responsibility of the agency to issue accurate KID documents. Get in touch with us if you'd like our guidance on this.

Due Diligence, Consequences and Enforcement

HMRC have taken this opportunity to remind Employment Businesses that not being aware usually doesn't constitute a defence - therefore, your due diligence is imperative.

• We have seen an increasing number of new customers who have previously been involved in 'mini-umbrella' arrangements facing enquiries based on their historic suppliers.

• The failure to prevent facilitation of tax evasion is a criminal offence and can be prosecuted as such.

• There has been increased use of the Kittel Principle to deny input VAT, potentially over several years. With the value and proportion of input VAT that may come from outsourced employment, this can be catastrophic for businesses.

• Borderless provide a short, compliant and vetted supply chain, and we ensure that due diligence is provided to you proactively on a monthly basis.

Compliance is at the heart of what we do. With this in mind, our customers receive a full compliance pack before engaging. This consists of:

• Company incorporation documents

• VAT registration proof and current live VAT check

• Proof of PAYE registration details

• Copy of employment contract for the workforce

• Sample payslip to be sent to the workforce

• Copy of directors ID

• Insurance certificates

The guidance makes it clear that due diligence is an ongoing responsibility, and to give you comfort we also produce a monthly compliance pack showing;

• Current employment taxes position

• Current VAT position

• Live VAT check

• Details of any changes in directorships, evidence thereof and updated ID

In summary, the guidance draws together a number of resources which were already available into one combined document, and may signal the start of a new level of interest in the market. Borderless are proud to offer a complaint, safe and reliable solution to your Employment Outsourcing needs. If you would like to discuss the new guidance, your current requirements, or just the market in general - please get in touch today.

About the author

Lyndsey operates a small team of both internal and external compliance experts to ensure our local regulation knowledge is top of the game