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Access Financial: Latest Happenings at a Glance_June 2021

EU Deadlines

If you’re an EU, EEA or Swiss citizen, you and your family can apply to the EU Settlement Scheme to continue living in the UK after 30 June 2021. The Scheme closes for further applications on the 30th June 2021 (you must usually have started living in the UK by 31 December 2020) so if you do not apply by then you will have to hold the applicable visa. There are a variety of visas, including:

  • Long-term, Short-term
  • Investor, business development and talent visas
  • Other work visas and exemptions
  • Sponsors and sponsorship

Detailed information on visa requirements for working in the UK can be found here.

There is limited scope to submit a late application after 30th June 2021, however, the criteria are strict and we would strongly advise against banking on this option.

Similar provisions apply throughout Europe for UK nationals who reside/wish to reside/work there and to continue to do so, please contact AF for further assistance.

G7 Summit

We wrote a little while ago bout proposals from Helen Yennen, Secretary to the US Treasury and a former governor of the Fed talked about introducing a global minimum rate of corporation tax. We did not expect things to move so fast, and the recent G7 summit has decided, in principle, upon a minimum rate of 15%.

The agreement would see multinationals pay tax where they operate – known as “pillar one” of the agreement – and would apply to global companies with at least a 10% profit margin. Twenty percent of any profit above that would be reallocated and taxed in the countries where operations are carried out.

The second “pillar” of the agreement commits states to a global minimum corporate tax rate of 15% to avoid countries undercutting each other and a race to the bottom.

Ms Yellen stated that there was an understanding that national digital services taxes such as those levied by the UK and EU countries would be discarded and replaced by the new agreement.

The agreement will be discussed in further detail at a meeting of G20 finance ministers and Central Bank Governors in Venice this July.

As with all such major tax system overhauls, the devil will be in the detail and we will provide further updates as and when clarifications are received.

Umbrella and the way forward

The Guardian recently published a report on how much using umbrella companies may be costing the UK Treasury. They place a figure of GBP 4.5 billion, which dwarfs the loss through deemed employment and the use of personal services companies. Yet, parliament ruled out regulation despite heavy promotion by Ian Duncan Smith and Dave Davies.

The scandals surrounding umbrellas continue, featuring:

  • clinging to untaken holiday entitlement;
  • some 48,000 mini-umbrellas with Filipino directors and
  • the loan scheme

These issues, as reported by the BBC, are all providing a real headache to government and recruitment businesses alike and their supply chains. Who knows, even more shocks from unscrupulous providers may emerge.

The solution announced by the UK government is to bring recruitment businesses and umbrella oversight into the same department of state but without express regulation.

Our personal opinion is that if we were a recruitment business, we would not rely on this to secure our business. Instead, we would plump either for:

  • A proper Employer of Record solution in which contractors receive gross pay, and the agency or umbrella take all the employer costs from the client. Of course, this would end the all-inclusive rates we are used to, jettisoning one of the attractions to a client of contracting with freelancers or contractors;
  • Engaging a professional provider to run our payroll, so we know that the correct taxes and social security are deducted and paid adequately to HMRC.

Anything short of these will lead to law changes, making the entire contract chain liable for unpaid taxes rather like in the Netherlands.

Indian Free Movement

The Indian and UK governments have agreed to relax work permits for Indians and Brits who wish to work in each other’s countries. HM Government is desperate to secure a trade deal with anybody. We can see the move in the context of a prelude to that deal demanded by Modi’s government.

The geopolitical fall out in many countries with China and India as a democratic bulwark against the CCP has made relations with India shoot up the diplomatic priority list.

The very high cost of employment

While it is hard to say who’s driving this, more and more recruitment businesses and their clients demand that their contractors are employed rather than self-employed.

We are not sure that everyone is considering how demanding this is and the cost of achieving employee compliance. Employment is necessarily more expensive to do, but the client is not always willing to meet the cost, and agencies do not want to compromise their margins, so what gives? Asking your contractor to net less will vastly reduce the pool of available talent.

The costs of employer social charges, sickness pay, holiday pay, bank holidays, equal treatment, and thirteen or even fourteen months’ salaries are high. Then there is the cost of statutory notice periods and even termination payments if you want to release the worker early. Who is to pay for this? So, please, before you demand, make sure your clients do not have Champagne tastes but only lemonade pockets!

If stuck, Access Financial may have the secret sauce for your problem.