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Following the introduction of The Criminal Finances Act we have been working with many recruitment companies helping them develop their defence strategies.

There are clear and valid commercial reasons why companies in the supply chain should operate a PSL:

  • To assist the contractor's selection of reputable providers of services.
  • To protect the agency, contractors and end clients from any potential future and unforeseen liabilities.
  • End clients insist on a level of care as they are cautious on structures due to issues such as money laundering, colluding in tax avoidance and employment issues.
  • Potentially reduce the administration burden as a result of only dealing with a limited number of organisations.


All the reasons why an agency had a PSL previously, are as valid today as they were previously. Nothing has changed in that respect, in fact, it could be argued that with the implementation of new legislation, there is now an even greater need to run a PSL.

HMRC also appear keen for companies to operate a policy of PSL's:

  • They do not believe that companies have the requisite knowledge to make any recommendations as to the best operating structure for their contractors. This point also demonstrates the need for a PSL to go beyond umbrella providers.
  • With the Criminal Finances Act and Off-Payroll Working rules, and the significant liabilities attached, companies must now carry out reasonable due diligence on any provider they select for a PSL.
  • It is clear these rules are intended to marginalise the non-compliant providers in the marketplace. They can only gain access to the market by developing relationships with recruitment companies.


Clearly every company that operates a PSL takes detailed steps to ensure any provider on the PSL is appropriate, as best as they can judge. They have to satisfy themselves that a providers offering is legitimate, robust, compliant and secure.

They also, and probably more to the point, want to ensure that no third party provider could damage their own brand.

So the real issue agencies face today is whether they have the in-house expertise to manage PSLs appropriately. Without this expertise due dilligence can easily fall short and still leave agencies exposed. It was for this reason that Professional Passport developed it's supply chain support service on managed PSLs.

By adopting Professional Passport's managed PSL you completely remove your business from any risk of debt transfer whilst at the sametime benefitting from our unique insurance backed provider compliance assessment.

Whilst companies can still operate PSLs, we believe that when compared to Professional Passport's managed PSL, there is little benefit to you in doing so.

Professional Passport advocates that companies move to a 2-Tier PSL.

Tier 1

This is where a worker accepts and contract and has no pre-existing arrangements in place.

In these situations, a recruitment company can develop relationships with 4 or 5 providers, who all have been accredited as complaint, and point the workers to them.

We would also suggest that recruitment companies develop ‘rules of engagement’ for their Tier 1 providers that outlines expectations covering areas such as incentives, office visits and promotions.

Tier 2

Tier 2 is where the worker already has an existing relationship with a provider.

Where that provider has been accredited you can allow them to continue with that relationship.

Having as wide a selection as possible ensures that those workers with existing relationships can continue and preserve any rights already, they have already acquired with that provider. It will also limit the number of difficult conversations with potential new contractors seeking a contract through the recruitment company or end client.

Moving to this 2-tier structure for PSL’s demonstrates the steps you have taken to comply and will provide a defence should this be required. It also eliminates the risks of other, non-compliant, providers slipping under the radar and offering direct incentives to your consultants.

If you allow consultants to receive incentives from your PSL providers, then you will also need to ensure you have processes in place to ensure the consultants report this additional income on their self-assessment tax returns.

Many responsible providers pay incentives under the HMRC tax award scheme meaning that the basic rate of tax has been paid. This only leaves any high rate tax liabilities to be met by the consultants. HMRC can easily obtain the details of the payments made to consultants and where these have not been reported it is likely that this would be treated as tax evasion. That being the case it provides HMRC with the ability to apply 100% penalties on any taxes due. So, a £20,000 tax bill could become £40,000 with penalties, there would also be interest on top of this.

Where consultants fail to cover this The Criminal Finances Act provides a route back to the recruitment company for the unpaid tax unless you have processes in place to provide a defence.

We do not believe that simply amending contracts to prohibit accepting these payments will be enough. You must also have processes to ensure your contractual terms are being adhered to. If you have any concerns in this area or need assistance, then contact us.

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