Meridian CEO Mark Mitchell applauds Her Majesty’s Revenue and Customs (HMRC) in its decisive move to stop kicking controversial travel and subsistence (T&S) schemes into the long grass and issue clear and enforceable guidelines to prevent some of Britain’s lowest-paid workers being exploited.
Mark Mitchell’s comments were made in response to a letter reportedly issued this week by payroll firm Legitas to clients that states that, while in talks with HMRC to set the terms of a new model for temporary workers, payment to its workers will now be processed on a PAYE basis with immediate effect.
“Because Legitas will be paying every worker PAYE during these talks, it will not be processing any expenses. This means that temporary workers’ net pay will be brought in line to where it should be as they will have to fork out for employee National Insurance Contributions (NIC) and PAYE contributions that have up to now been avoided due to the processing of what appear to be incorrect expenses. This will all add up to a significant unexpected reduction in net pay in some instances.
“In addition, Legitas will be liable for full employer’s NIC payable for thousands of people every week. If the additional employer’s NIC is pushed back to the agencies, which is likely to happen, then the agency may well have a financial problem as many have moved to the Legitas model to support low margins they have won or retained business at. I don’t need to spell out what the consequences may be if the agency now has to pick up the additional employer’s NIC at the same time dealing with a very unhappy workforce.”
Under a special HMRC dispensation, tax-free travel and subsistence expenses payments can be made to workers as a benefit outside their actual gross wage, allowing a reduction of PAYE and NIC which is not always given to the worker in full as it should be. Estimated to cost the taxpayer up to £650 million a year, controversy and legal challenges over these schemes have dogged the industry for years.
“I think that for too long companies such as Legitas have exploited HMRC’s lack of consistency, clarity and enforcement in respect to these schemes and as a result have propagated expenses models such as the ‘payday by payday’ that has brought our industry into disrepute and hurt the pockets of those that can least afford it.
“Naturally, we are delighted that HMRC seems to be moving decisively and in the right direction on these tax-relief schemes. As an ethical player on very unlevel playing field we applaud HMRC bringing fairness back into the game.
“While it has taken some time, it would seem that the recruitment industry has reached a tipping point, and there is to be no turning back to these unethical practices. Every industry has its ‘horse-meat’ scandal, ours has been T&S schemes. And while businesses like Meridian that only embrace compliant T&S schemes and have always supported HMRC in its attempts stop these non-compliant schemes, we have suffered from the collateral damage as a result of the controversy, perceived ambiguity and legal wrangling that have ensued for so long. We entreat our industry’s leaders to get behind HMRC. The collective force of REC, Apsco, IOR and TEAM will bring our industry back to where it should be, as a valuable service provider of both permanent and flexible workforces with its focus on candidates and clients.
“HMRC will hopefully not stop here and call this result a complete success; it must now tackle T&S schemes head-on and on an industry-wide basis, issuing clear and enforceable guidelines, ensuring that the temporary workers who have lost out because of this type of sharp practice, are not put at further risk by them simply being pushed to another exploitative tax-relief scheme.”
