Contracting Matters

No changes to the rules surrounding expense claims by contractors! After this good news for contractors in November’s pre-budget report, what next? I’m wondering what HMRC has in store and how it will affect  Contractors and Agencies.

With HMRC eager to pursue what it clearly believes is tax avoidance, Contractors need to be very aware of offshore solutions. And of ‘rogue’ umbrella companies persisting with practices that cannot be good for the recruitment industry.

It was great news to see no changes to the rules surrounding expense claims by contractors in Alastair Darling’s pre-budget report. But now we’re all wondering what the HMRC plans to do next and how this will affect both contractors and agencies.

HMRC has published concerns over the continuing use of offshore ‘schemes’ and also announced new powers to investigate them via tax treaties – with Isle of Man, for example. The 2008 budget included retrospective powers for HMRC to pursue what it clearly believes is avoidance. What does this mean? First, you must be very wary of offshore solutions, as they are in danger of invoking MSC legislation. Even if legal advice states the solution is legitimate, it’s important to establish that the company treats all their workers’ income as employment income.

Disappointingly, some ‘rogue’ umbrella companies continue to advertise material gains via the use of expense policies. This practice cannot be good for any parts of the recruitment industry and we continue to lobby against it.

Parasol continues to work with the Service Providers Association (SPA) on improving standards. I believe agencies should be able to make the distinction between the previously mentioned ‘rogues’ and the true professionals.