Employment Agencies: Tax Avoidance

(asked on 8th May 2019) - View Source

Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what assessment his Department has made of the level of involvement of recruitment agencies in disguised remuneration loans.


Answered by
Mel Stride Portrait
Mel Stride
Secretary of State for Work and Pensions
This question was answered on 13th May 2019

DR schemes are contrived arrangements that pay loans in place of ordinary remuneration, usually through an offshore trust, with the sole purpose of avoiding income tax and National Insurance contributions. The loans are provided on terms that mean they are not repaid in practice, so they are no different to normal income and are, and always have been, taxable.

HM Revenue and Customs (HMRC) will always seek payment of the loan charge from employers in the first instance. It is only where HMRC cannot reasonably collect from the employer, for example where the employer is no longer in existence or is based offshore, that the individual will be liable to pay the tax due. Around 75% of overall yield from the measure is expected to come from employers.

Only an employer, or umbrella company established for the purpose, can originate a DR scheme. Recruitment agencies match individuals with engagers who require their labour. In most cases recruitment agencies do not employ the individual in question. Where a recruitment agency used a DR scheme to reward their employees they will be liable to pay the loan charge in the first instance.

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