Without doubt, the General Anti-Abuse Rule (GAAR) is shaping-up to be the most heavy-hitting piece of legislation to come into force in recent years. If you thought that the MSC and Debt Transfer legislation ruffled a few feathers, well just you wait until the ‘Offshore Employment Intermediaries’ kicks in (April 2014) under the GAAR banner.
The crux of the GAAR proposal is this; a recruitment agency will have an obligation to ensure that its contract workers are engaged compliantly. Previous 3rd party debt transfer legislation has made the agency (potentially) liable if they actively refer or recommend one of their contractors to a payroll provider who turns out to not be deducting tax correctly. GAAR goes one (big) step further by putting the agency at risk simply by engaging with a contractor using a tax avoidance scheme regardless of whether or not the agency was actually involved in setting-up the scheme.
In other words, if an agency sources and places a candidate onto an assignment, the agency could find themselves liable for unpaid tax even if the contractor had established their relationship with their scheme provider long before the contractor and the agency ever came into contact with each other. This is a game-changing development!
The way we see it, agencies have got two choices; they can bury their heads in the sand like the proverbial ostrich, or they can take a proactive stance and put a robust due diligence strategy in place in order to navigate this new, more hostile landscape.
As with most legislation that gets introduced, GAAR will help sort the wheat from the chaff and as such should be welcomed by providers that are already operating correctly. As a compliant and industry-aware provider, Liberty Bishop has been involved in the various consultation processes that HMRC have held in the developmental stages of GAAR. It goes without saying, of course, that we are here to help and are happy to share our expertise with our partner agencies.
Final drafts of the legislation are due to be released at some point during the Autumn, keep an eye on the Liberty Bishop blog http://blog.libertybishop.co.uk/ and website www.libertybishop.co.uk for further developments.