Recruiters; ready for April 6th? Here are your top Five concerns #5

Within the always exciting topic of tax, we have lots to share at the moment. UK tax is a constantly shifting landscape, often due in no small part to confusingly grey legislation, so we’ve caught up with Jovan Pavlicevic – commercial director at forest accountants, to understand what April 6 has in store for recruiters.  Don’t want to bombard you with too much excitement at once so this will be spread over 5 blog posts 🙂

According to Pavlicevic, as the new financial year rolls over HMRC is announcing a series of new rules. Each new piece of legislation has been through consultation, and it’s now clear what HMRC are trying to achieve… Times are tough, so the belt is being tightened.

#5: LLP Salaried Partner Rules

The LLP structure favoured in the legal and accounting sectors has been under scrutiny, and HMRC are clear that this is a structure they’ll regulate more tightly. Over the past few years we’ve seen more recruitment businesses setting themselves up in the LLP structure too.

In a nutshell

At present a member of an LLP is automatically treated as being a self-employed partner, rather than an employee. The changes mean that LLP members who were previously salaried members (and presumed self employed with the inherent tax efficiencies) will now be classed as employees from a tax standpoint – with full employee taxes applied, not least of all, ERNI. The result is significantly higher tax and compliance costs, with many LLP’s requiring a radical restructure.

So what does it all mean?

The UK is in for a price shock. Put simply, the Government is going broke, so a number of tax advantages that were previously available are being shut down. The cost of employing is going up substantially – compulsory auto enrolment pensions being a further driver. With the way the new legislation is structured, HMRC are stating clearly that avoidance would be foolish, so the market, and we as consumers, will have to cope with that increased pressure on employers in the form of higher costs.

There are other changes being introduced, and we’ll keep you informed. Forest is an ICAEW member firm, and FCA regulated firm of financial advisers. They can be contacted on: 0845 459 4099.

Stay tuned for number 4 on the countdown – The Offshore Intermediaries Legislation.