How to ensure your Umbrella Companies pay tax to HMRC for all your workers?

This is a guest blog by REC business partner SafeRec

The recruitment industry has navigated a cloud of uncertainty regarding umbrella company compliance, particularly in understanding the company they always worked with is compliant. This lack of transparency and accountability led to reliance on accreditation bodies, which, unfortunately, fell short of providing the necessary assurance.

Let’s be clear, the primary risk for agency when working with non-compliant umbrella companies is a tax liability. However, until today there has been a significant gap in verifying whether taxes were accurately calculated and paid compliantly by Umbrella Companies to HMRC which exposed your business to substantial risks.

Understanding your liability

The liability for recruitment agencies centres mainly around tax compliance. While reviewing contracts, processes, and policies each year is also important, it does not protect your agency under the three central legislations:

• Section 44 of the Agency Legislation: Makes your agency liable for PAYE (Pay As You Earn) and NIC (National Insurance Contributions) if workers are paid by their Umbrella companies directly into their Personal Service Companies (PSC).
• The Offshore Intermediary Legislation: Imposes liability on your agency for PAYE and NIC if workers are engaged through Offshore Intermediary Umbrella Companies. Crucially, agencies can be liable even without direct knowledge of the offshore engagement.
• The Criminal Finances Act 2017: Establishes a criminal offence for failure to prevent the facilitation of tax evasion. Agencies must conduct due diligence to demonstrate reasonable care in preventing schemes such as mini umbrella companies in their supply chain.

Unfortunately, traditional methods of verification have always been flawed as Umbrella companies can doctor documents they send to agencies or accreditations bodies for review, making them unreliable. This highlights the necessity for agencies to re-evaluate how they engage with Umbrella Companies to mitigate these risks effectively.

How to check taxes have been paid

The solution lies in a new approach to compliance. SafeRec's Certification for Umbrella Companies offers a ground-breaking method to ensure tax compliance. This certification was explicitly designed with the unique challenges faced by recruitment agencies and their workers in mind, adapting to the evolving legislative landscape.

The SafeRec Certification operates on five core principles:

1. Real-time Auditing of the entire payroll of a certified Umbrella Company, each week, all year long.
2. Auditing at Source: Uses advanced API technology to directly receive in real time payroll data, removing the risk of data manipulation.
3. Reconciliation with Data Received by HMRC: Cross-references data with RTIs and checks HMRC tax accounts each month to ensure all taxes for all workers on each payroll have been paid to HMRC.
4. Ongoing Review: Continuously assesses contracts, processes and policies to ensure they align with laws and best practices.
5. Transparency Across the Supply Chain: Provides tailored monthly reports to agencies detailing audits and tax payments to HMRC for their workers.

These principles make the SafeRec Certification an unparalleled standard in Umbrella Compliance, providing real-time transparency and come at no cost for recruitment agencies.

That’s the reason why today, already 3,500+ recruitment agencies work with SafeRec Certified Umbrella Companies.

The future is now

The introduction of SafeRec's Certification represents a significant shift towards greater transparency and accountability in the recruitment industry. By choosing to work with SafeRec Certified Umbrella Companies, recruitment agencies can ensure compliance with tax regulations, protecting themselves and their workers from potential liabilities. This move not only secures the agencies' operations but also promotes a culture of trust and integrity across the recruitment supply chain. It's time for agencies to embrace this change and ensure their Umbrella Companies are truly compliant, safeguarding their future and the future of their workers.

Want to learn more about the SafeRec Certification for your business? Book a call today at: https://saferec.co.uk/contact#book-demo/all