When HM Revenue & Customs (HMRC) announced task force activity into security guards, bouncers and their employers last September, it justified the action by saying it had seen an increased risk of fraudulent VAT repayment claims.
However, in practice, HMRC has been pursuing an expanded agenda by questioning the terms of engagement the security firms have with their ‘operatives’ and their associated employment status.
I have repeated below a recent letter from the Specialist Investigations team within HMRC to a company which provides security solutions/workers to a number of end clients. This sets out HMRC’s approach:
As part of our responsibility for assuring the correct operation of the PAYE/NIC & VAT regimes, HMRC has launched two Taskforces focusing increased attention on businesses operating within the security industry.
Consequently, I would like to visit your firm on XX/XX/XXXX at XXam to discuss the day to day operation of the business including what type of security work is undertaken, which firms use your services, the terms of your arrangements with those firms and the terms of engagement you have for your security operatives and other staff. Additionally, I would also like to discuss the arrangements and contractual situation you have in place for any security personnel not directly engaged by you.
I will be accompanied by my colleague, Mr X XXXX and anticipate that the meeting will last between one to two hours. If the suggested date and/or time are not convenient, please let me know so we may make an alternative arrangement together.
Please note the meeting does not constitute a formal Employer Compliance or Status review or a formal VAT Assurance visit. Should I later need to move to any of these positions then the company will be informed in the normal way.
After our discussion, I will consider all the information you have given me and will let you know, within a reasonable length of time, if anything more is required.
At the visit I will want to talk to the director(s) and other ‘responsible persons’ the directors may decide should be present, who hold overall responsibility for running the business, making decisions and managing/engaging the workforce. During the visit I may also ask to look at various records to support our discussions and it would be greatly appreciated if business records for the last three years (if applicable) are made available on the day of our visit.
These should include, where applicable:
- Proof of Identity (Passport, Driving Licence).
- Certificate of Employer Liability Insurance.
- Name, address, telephone numbers and national insurance numbers of workers obtained or recruited.
- Individual Purchases/Customer Ledgers.
- Purchase and Sales Invoices.
- Contracts/Tenders and/or letter(s) of intent.
- Bank Statements.
- Wages records, time sheets/logs.
I thank you for your co-operation in this matter and I look forward to meeting with you shortly.
Yours faithfully etc.
No doubt many tax advisers would be sorely tempted to advise their clients not to co-operate with HMRC without a formal enquiry in place, particularly as the visiting officers are asking to see the business records covering the last three years.
As usual, tax advisers should treat each case on its own facts and liaise with their clients accordingly. The thrust of HMRC’s compliance activity centres on the three key factors of Supervision, Direction and Control. This is a specialist area of tax where security firms should seek professional advice, in the knowledge that a Memorandum of Understanding between the Security Industry Authority and HMRC has been signed, allowing for an exchange of information between the two organisations. In addition, HMRC has stated it expects to recover £10m from this task force work, which is currently limited to London and the South East but is expected to be rolled out to other parts of the UK in time.
If you are a tax adviser or security firm seeking specialist help, two members of the ReSource team – Jacqui Mann and Nigel Nordone – are experts in this field and are ready to help. Our telephone number is 0845 223 2727.
Author: Guy Smith, Team Leader of the Senior Tax Consultants on the ReSource Tax and VAT Consultancy Team.
E mail: firstname.lastname@example.org