5th October 007

Taxing Contributions - Recruiter Magazine 3rd October 2007

Few recruiters enjoy paying taxes. But if there is anything worse than handing over your own hard-earned money to the government, it's being asked to pay the tax of others.

But that is exactly the prospect faced by recruiters from 6 January, when the debt provisions of the managed service company (MSC) legislation, take effect. That's the date that recruiters can become liable for the unpaid tax and National Insurance Contributions (NICs) of MSCs.

The legislation, part of the 2007 Finance Act, was designed to get an estimated 225,000 contractors to cough up their fair share of tax by targeting the firms who provided schemes specially to help them evade it — up to £200m a year. Unfortunately, recruiters got caught in the cross-fire.

Michael Kessler, business development director at European Recruitment Network (ERN), says the financial consequences for recruiters could be disastrous. "You are talking significant amounts of money," he says. "Especially," he adds, "when you are supplying hundreds of people." As he points out, National Insurance contributions, Her Majesty's Revenue & Customs (HMRC) penalties and accrued interest quickly add up to a tidy sum. And that's before income tax. So how can recruiters protect themselves?