Autumn Statement: Crackdown on intermediaries supporting false self-employment

06 - 12 - 2013

New rules will be introduced to prevent ‘employment intermediaries being used to avoid employment taxes and obligations by disguising employment as self-employment’, Chancellor George Osborne has announced.

The move, announced as part of the Autumn Statement, is one element of the government’s bid to recoup £9bn in unpaid taxes over the next five years.

It is understood that the new measures will target agencies rather than personal service companies.

Currently, agency staff are considered self-employed as long as they meet certain criteria. The right to send someone else to do a job instead of you (the right of substitution) is one of the tests a worker must pass to be considered self-employed.

Where a worker is self-employed, the recruitment agency does not have pay to employer's National Insurance contributions for that worker.

Agencies which have been using contracts which include a right of substitution where there is no such right will be targeted by HM Revenue and Customs.

Employment intermediaries which promote tax avoidance schemes which HMRC consider to be ineffective will also be targeted by HMRC.

A small number of cases are selected as tests by HMRC and the cases can take a few years to go through the courts.

The remainder of cases, which are known as ‘followers’, can normally operate as usual while waiting to find out the results of the tests. If HMRC is successful in the courts, it can recoup the money from followers later.

Under the new rules, followers will be asked to concede their case if the test is defeated at any stage in the courts. Followers that refuse to concede because they hope the test case will succeed on appeal will be penalised if the test case loses the appeal for the same legal reason.

In addition, once HMRC wins the case, followers who refuse to concede will still have to pay any tax which has been avoided, even if the test case itself appeals to a higher court.

The rules may be tightened further to prevent intermediaries from gaining a cash-flow advantage while a tax avoidance scheme is being tested.






Foremans LLP Umberlla
Foremans LLP