Ahead of the 2021 off-payroll changes, HMRC has issued updated guidance on due diligence for workforce and temporary labour supply chains. As a reminder, the off-payroll changes mean that hirers will be responsible for determining the tax status of their contractors, and alongside this responsibility they have a duty to ensure that the tax status is properly implemented by their supply chain, e.g. recruitment agencies and other intermediaries. This in turn means that hirers are likely to increase their focus on tax compliance throughout the supply chain, and MRC’s updated guidance outlines possible due diligence that they could undertake.
There is lots of helpful content for businesses engaging short-term workers, things like understanding the workers and the provider of the labour, e.g.:
- who provides the workers
- who the workers actually are
- what their employment status is
- who is responsible for making sure how they are paid and how much
- is there is any indication of exploitation/modern slavery
- are they allowed to work in the UK
As well worker-specific considerations, HMRC advises due diligence on the whole supply chain, ensuring that suppliers are legitimate, and ensuring that workers are actually paid their contractual rate. Hirers should not assume tax compliance, instead they should be vigilant for previous business failures or possible criminal intent. They should check the credibility of directors and verify signatories of contracts are accountable office holders.
Hirers should also know how long their supply chain is. As we know, margins become tighter with every later of subcontracting, which in itself can encourage non-compliance if it becomes impossible to pay workers the NMW/NLW. Longer supply chains also increase the risk of fraud, so hirers should be vigilant in checking any onward subcontracting and ensure their suppliers do exist.
The guidance is really good and well worth reading, particularly if you are a recruitment agency or end-hirer. You can access it here.
We often criticise HMRC’s communications, however this one is very good and we hope it makes a difference so that workers are treated better as a result.