Having an up-to-date and compliant Preferred Supplier List (PSL) is crucial for recruitment agencies. The government is increasing its efforts to crack down on tax-avoiding contractors and non-compliant payroll providers – which is evident from the introduction of the Loan Charge (2019).
The importance of having a reliable PSL
The main advantage of having a PSL is that it puts your recruitment agency in control. A properly enforced and compliant PSL gives you control over the providers which your recruitment agency refers their candidates to – and eliminates risk.
Having carried out sufficient due diligence on all the suppliers you want to include on your PSL, you can be sure that your agency is only partnering with the best umbrella companies in the industry. It also ensures that you are only referring your candidates to compliant, reliable and professional payroll providers – protecting both yourself and them against potential tax avoidance schemes and trouble with HMRC.
Why supply chain compliance is so important
From 30th September 2017, the Criminal Finances Act came into effect and it stated that a business would be criminally liable if it failed to prevent those who act for it, or on its behalf, from facilitating tax evasion. This means a recruiter could be held criminally responsible if their recommended payroll providers (umbrella companies) help contractors to avoid tax. The recruiter is also held responsible if they had no knowledge of the wrongdoing because they would have failed to do correct due-diligence.
Penalties for failing to prevent tax evasion
A business that is found to be guilty of preventing tax avoidance and tax evasion could face financial penalties, criminal prosecution and restrictions on trading in regulated industries.
How can a PSL help your recruitment agency?
Having a completely compliant and reliable PSL can help a recruitment agency in the following ways:
- It reduces the risk of staff members suggesting non-compliant providers to clients as they have a set list of compliant umbrella companies to choose from.
- A PSL can show that the company has appropriate prevention procedures in place to ensure candidates don’t engage with tax avoidance schemes.
- Carrying out due-diligence checks on each provider is extremely time-consuming and if you do not have a PSL, you could have hundreds of clients asking to use different providers each month. Also, each umbrella company will also have its own processes for invoicing and contracts which will need to be managed by your staff.
You should do regular reviews of your PSL to ensure that your payroll providers are still compliant and that you are only sending your candidates to suppliers that you know will provide the best legal service.
Your PSL checklist
Bluebird Umbrella has created a short checklist which you should consider before adding a payroll provider to your PSL:
- Is their website useful and full of up-to-date industry information?
- Can they prove that they have a 100% compliance record with HMRC?
- Are their employees knowledgeable and easy to communicate with?
- Do their staff have plenty of industry experience and knowledge about the latest legislation changes?
- Are they professional and do they abide by HMRC rules and regulations with expense claims?
- Have they been set up in the UK and are all their activities onshore?
- Do they offer extravagant incentives in accordance with the Bribery Act 2011 legislation?
Why you should add Bluebird Umbrella to your PSL
Bluebird Umbrella operates in full compliance with all of HMRC’s laws and regulations. Our intention is to provide contractors and freelancers with a straightforward and reliable payroll service – so they have more time to do what they love!