Referring to the announcement last week of a government consultation into offshore tax arrangements, often used by temporary workers, Adrian Marlowe, chairman of the Association of Recruitment Consultancies (ARC), said:

“It is to be welcomed that the government is finally taking some action. The temporary workforce has significantly increased over the last 20 years and so HMRC is correct to review the rules where a perceived unfairness has arisen, but this is a normal process of evolution.  It is hard to blame any party for relying on the legal rules in the meantime.

“For example, HMRC has known that the island of Sark has been out of scope for payment of employer’s NI, and that workers have been employed through companies operating on that island for many years, presumably reflecting previous government policy. This must give rise to the implication, in all fairness, that this kind of practice was then officially acceptable.”

However ARC argues that now the government has decided to address the issue, it is important that clear rules are provided not only in this area but also on the wider agency worker picture.

Marlowe explained:  “The ability to off-set travel and subsistence expenses against tax and national insurance is important if today’s flexible workforce is to be retained, and indeed encouraged, unless the costs of hire are to be increased. However HMRC’s tests, as to whether one form of employment is or is not acceptable in order to obtain the tax relief, are constantly evolving;  what was acceptable a year ago may no longer be acceptable despite there having been no new law in the meantime. This leaves agencies and umbrella employers confused and uncertain of the position, in turn giving rise to the possibility that an agency worker may find net income being affected from one month to the next.”

Marlowe concluded “Given the government’s new focus on tax in relation to temporary workers, a tidy up in this area would be helpful. If successful it could give security to agency workers in their employment, save huge amounts of time and effort for HMRC and operators in the sector, restore faith within the industry and ensure that correct levels of tax are recovered consistently in line with policy. This must be a target worth aiming for.”

ARC is in discussion with HMRC and the Treasury.