Independent Businesses Criticize 'New HMRC Red Tape'

by Robert Lee, Tax-News.com, London

26 December 2014

UK business groups have warned that new HM Revenue and Customs (HMRC) reporting regulations will create unnecessary red tape for flexible workers and seriously disrupt the labor market.

New rules on onshore employment intermediaries entered into force on April 6, 2014. They closed a legislative loophole with the aim of tackling the use of employment intermediaries who facilitate "false self-employment" to avoid income tax and National Insurance contributions (NICs).

Accompanying regulations on record keeping, returns, and penalties are scheduled to enter into force from April 6, 2015. Recruitment firms will be required to collect, verify, and report certain information about self-employed workers and company directors to HMRC. Freelancers will have to collect this information from anyone they subcontract work to.

The Association of Independent Professionals and the Self-Employed (IPSE), the Recruitment and Employment Confederation (REC), the Freelance and Contractor Services Association (FCSA), and the Association of Professional Staffing Companies (APSCo) have raised concerns about the scale of the plans. In a statement, the groups said that while some reporting is needed to enforce the onshore intermediaries legislation, the new stipulations are excessive.

According to the statement, the regulations will create a major administrative burden, and introduce risks in handling personal data. The cost of installing systems that can securely collect and store data could reach into six figures.

Simon McVicker, Director of Policy and External Relations at IPSE, said: "Throughout the consultation process, we have been repeatedly assured that legitimate independent professionals would not be affected by these new rules. It is therefore all the more ridiculous to find that thousands of freelancers will be forced to conform to the onerous reporting requirements now outlined in the draft statutory instrument. The regulations will strongly discourage independent professionals from subcontracting and collaborating with others."

Samantha Hurley, Head of External Relations at APSCo, recommended that the reporting requirements be changed, so that only company and payment information is sought. Removing the obligation to report personal data would significantly reduce the burden on recruitment firms and minimize the potential for data loss, she claimed.

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