Government Puts Spotlight on Recruitment Agencies

On April 22nd, HMRC published guidance notes titled, “Warning for employment agencies using umbrella companies (Spotlight 64)”.

The notes were published to help recruitment agencies understand and identify non-compliant umbrella companies that use recruitment agencies to sell tax avoidance schemes.

The guidance notes included identifying the signs that an umbrella company might be operating a tax avoidance scheme and tips on how agencies could protect themselves and their workers.

Potential Risks to Recruitment Agencies

Spotlight 64 also included a section outlining potential risks for recruitment agencies and gave insight into the government's position on agencies that engage with suppliers that promote tax avoidance schemes.

The guidance stated that employment and recruitment agencies face reputational risk if they take part in non-compliant supply chains and may struggle to secure and maintain contracts and business relationships.

Additionally, and possibly most significantly, HMRC warned that recruitment agencies “could also face financial damage due to penalties and tax liabilities.” The guidance went on to clarify that “HMRC will pursue those who promote or enable tax avoidance”.

The guidance confirmed, “If HMRC defeats an abusive tax avoidance arrangement, they will use the enablers penalty regime against anyone who:

• designed the arrangement
• sold the arrangement
• enabled the use of the arrangement.”

Recruitment Agencies Must Take Responsibility for Compliance in Their Supply Chain

The government’s inference that recruitment agencies could be seen as enablers of tax avoidance schemes within their supply chains, if found and subsequently defeated, should set alarm bells ringing.

Agencies need to prioritise due diligence to ensure compliance within the supply chain. This will protect them from financial risk and benefit them from greater trust and legitimacy in the eyes of clients, workers, and regulatory authorities.

With our Professional Passport Umbrella accreditation, TJW Contract Solutions represents a compliant, transparent, and risk-free solution for contractors, agencies, and hirers.

If you want to know how TJW Contract Solutions provides a compliant and transparent payroll solution for contractors and agencies, call the TJW team on 01784 270300. We’re always happy to help.

Alternatively, visit our website at https://www.tjwcontracts.co.uk/ or follow us on LinkedIn.

For a full copy of the Spotlight 64 Guidance Notes, visit: https://www.gov.uk/guidance/warning-for-employment-agencies-using-umbrella-companies-spotlight-64?s=09