Offshore, Onshore, Unsure? Presented by Samantha Hurley Head of External Relations & Compliance The Association of Professional Staffing Companies

 General election May 2015  Tax avoidance – emotive subject  Government seen as having taken action  2014 Finance Bill – Budget 19 th March  Onshore consultation has been rushed  APSCo engaged extensively with HMRC  Draft guidance end of February  Final legislation probably not before Budget Why now?

 HMRC has closely linked measures  Compliance & liability moved up supply chain to “Intermediary 1”  Intermediary 1 – contracts directly with client  Recruitment industry to drive compliance, but no control, & currently no statutory defence  Quarterly returns for workers not accounted for by RTI  No end-user client liability Offshore & Onshore Link

 Aim stop tax avoidance by offshore employers  Contractors ultimately engaged offshore  Intermediary 1 wholly & immediately responsible for accounting for tax & NICs  Includes “employer obligation” in terms of all statutory payments  RTI & quarterly returns  Oil & gas – responsibility/liability to onshore associate/agency/branch Offshore – Key Points

 Aim to stop false self-employment  Contractors engaged on SE basis through intermediary & all conditions below apply:  subject to (or to right of) control, supervision or direction as to the manner;  to provide their services personally;  all remuneration in consequence of services; and  remuneration not to constitute employment income apart from under this agency legislation. Onshore – Key Points

 Intermediary 1 responsible & liable for deducting tax & NICs  All intermediaries must consider: 1.Agency legislation 2.MSC legislation 3.IR35  Assumption of control – requirement for proof if lack of control/supervision/direction  RTI & quarterly returns Onshore – Key Points

 HMRC: won’t generally apply to PSCs due to dividend payments  Umbrellas – employment relationship so tax & NI’d at source  Recruitment firms need to be able to identify PSCs & umbrellas – might not be so obvious in future  All intermediaries included in reporting obligations PSCs & Umbrellas in or out?

HMRC has indicated:  Reduced reporting requirement for PSCs  Name of Worker  Name of Company  Amount  Acknowledgment that Umbrella already reports via RTI  Intermediary 1 may be able to transfer its reporting requirement to the umbrella Reporting Obligations

To reduce risk will need to undertake checks to understand/confirm the following:  That all intermediaries are onshore  A genuine PSC  The contractor is a director  The contractor is a shareholder  Where there is an employment relationship  Umbrellas  PSCs (usually)  Proof of no control, supervision or direction Increased Compliance Checks

 HMRC has promised guidance (non-statutory) on appropriate compliance checks  APSCo will see a draft version for comment  Legislation as drafted in breach of EU proportionality principle  Requires a statutory defence  HMRC indicated considering defence for both offshore & onshore Guidance & Statutory Defence

 Increased compliance checks (HMRC guidance)  Supply model risk:  PAYE no risk  PSCs lower risk – with compliance checks  Umbrellas lower risk – with compliance checks  Offshore will be high risk  Self-employed intermediaries high risk – unless proof of no control, supervision or direction as to the manner Likely Effects

 Contractual indemnities flowing down supply chain  Indemnity against liability for tax/NI (inc. penalties)  Proof/confirmation of compliance checks  Ability to terminate if checks not acceptable  Additional quarterly reporting  Proliferation of umbrella PSLs & reduction to small number of known UK companies  Reduction in use of self-employed & offshore intermediaries Likely Effects