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Lighting a path across the compliance landscape
Julian Ball | Legal Director
Friday 29th Oct, 2021
PayStream has been providing accountancy and umbrella services to contractors for over 20 years. In that time, big changes to the regulations affecting our industry have put compliance at the top of the agenda for many companies.
We’ve worked hard to stay one step ahead and reached some key milestones on a journey that has made us one of the UK’s most trusted and compliant providers.
2007. MSC legislation.
With HMRC targeting contractors who were taking unfair advantage of the tax system, PayStream was closely involved in the consultation process and drafting of HMRC’s guidance since we wanted to ensure that we could compliantly continue to advise PSCs.
Our training sessions helped agencies establish a compliant approach, while internal audits meant that our interactions could never be construed as ‘involved’. We were also ﬁrst to commission an extensive MSC audit carried out by BDO, which provided an objective opinion to share with agencies.
The emergence of Professional Passport (2007) and the FCSA (2008) further increased confidence and focused minds on compliance. We have been members of both and still advise agencies to check membership when compiling Preferred Supplier Lists.
2011. Agency Workers Regulations.
Initially introduced to secure the same basic pay and employment conditions for agency workers as permanent employees, the scope of AWR turned out to be much wider ranging. With great uncertainty around a number of its conditions, PayStream brought clarity and certainty for agencies by hosting seminars and creating an online AWR portal, which is still used today.
These rules stated that any liabilities for workers found not to be genuinely self-employed could be transferred to the ﬁrst intermediary in the supply chain – typically the agency.
As our SDC checking processes were already in place, PayStream was on hand to support agencies through this significant change.
In the same year, legislation was brought in to tackle the oﬀshore schemes used by contractors to avoid paying employed levels of tax in the UK. HMRC had been unsuccessful at closing down these schemes and recovering tax, but were now empowered to go after a UK agency to pay the bill. This further emphasised how crucial it is for agencies to know they are dealing with compliant providers.
PayStream had previously campaigned against changes that were deemed as detrimental to contractors and far from the level playing ﬁeld that was envisaged. Nevertheless, new legislation arrived that imposed restrictions on a worker's ability to obtain tax relief on travel and subsistence costs unless it could be shown they were not under SDC.
This carried a signiﬁcant ﬁnancial impact for agency workers and for the umbrellas themselves, who now faced the prospect of HMRC recouping tax losses from them. PayStream got ahead of the change, highlighting its implications, and helped workers to understand its impact which was key in supporting agencies with the retention of their workers.
2017. Criminal Finances Act
The main aim of this legislation was to make companies more accountable for their employee’s actions. If a consultant was to encourage a contractor to join a non-compliant scheme, the agency and its directors could find themselves prosecuted. This once again reinforced the need for agencies to know they were only dealing with compliant providers.
Although to date there has been little enforcement in this area, the threat is still there and Government are moving ever closer to a more cohesive approach to ensure enforcement efforts are coordinated and targeted.
2017 & 2021. Off-payroll working legislation.
Having ﬁrst introduced changes to the way IR35 was administered in the Public Sector in 2017, the Government extended its remit to the private sector in April 2021.
Its complexities left many confused and concerned by the ﬁnancial impact of a mistake. Knee jerk policy changes in certain sectors saw some decide to introduce a blanket ban on PSCs, rather than undertake a compliance process to manage the risk.
At PayStream, our main focus has been to educate, inform and advise all those affected. Our online portal made the IR35 review process quick and easy, providing an audit trail if challenged by HMRC. Our webinars and seminars have both educated and advised on the new landscape.
Is umbrella regulation the next step?
Amid frequent calls to regulate umbrella companies, MPs cite examples of nurses caught in oﬀshore schemes, workers whose holiday pay has been withheld and billions of pounds in missing tax revenue.
The reality is that current legislation does address these issues and more, but to be effective it must be enforced. Compliant businesses like PayStream willingly follow a code and submit to voluntary audits. We’re determined to raise standards and are ready for any regulatory change.