International contractor management specialist, 6CATS, and the Association of Professional Staffing Companies (APSCo) have urged recruitment agency owners to address their contractor compliance solutions now to reduce the associated risks to their business as the country moves towards a potential no-deal Brexit on Friday. The two have called on recruiters to reconsider their compliance processes and the impact of the ‘Temporary Right of Residence’ (TRR) letters that several EU authorities have issued.
Michelle Reilly, CEO of 6CATS and Founder of 6CATSPRO – the firm’s consulting business – commented:
{While ultimately no one really knows what will happen after Friday and legal guidance is sketchy as a result, there are a number of pointers that recruitment firms would benefit from following. We’ve already seen several EU destinations offer TRR letters for UK nationals operating compliantly across the bloc, giving these individuals leave to stay and work in the country for a specified time-frame. However, it’s important to stress that these are only being issued to those professionals who are legitimately registered in the tax system of the destination they are working in. Any recruiters with UK contractors using structures such as a UK Ltd Company or a UK umbrella company and claiming to work under the 183 day rule, should be very concerned. These structures are already risky options, as often the contractor will not comply with local registration requirements. Post-Brexit, it is highly likely EU countries will not recognise any UK employment structure as a way to work in Europe. We are already seeing France and Germany reject A1 applications for UK contractors, which is an integral requirement if using a UK Ltd. Company overseas. We would urge recruitment businesses engaging UK contractors in this way, to urgently review this and where possible, localise the contractor in the country of work as soon as possible. For any agencies unsure of their contractor compliance, it’s pertinent to seek expert advice.”
Tania Bowers, General Counsel at APSCo, added:
“There’s no doubt that uncertainty is the only certainty with the Brexit negotiations at the moment. We are pleased that our members are making use of the international helpdesk we operate with the support of 6CATS for individual queries. If they have not already done so recruiters must review their contractor routes to market across the EU. If contractors are utilising a UK solution or any other solution where their ability to work is at risk post Brexit then this should be urgently reviewed with the contractors concerned, with a view to a switch to a fully registered in-country (where the services are performed) solution. Even if, as is expected, Theresa May does obtain a further extension to Article 50 on Friday, no deal remains a risk in a few months’ or a year’s time. We also can’t forget that any UK recruitment company director is at risk of criminal liability under the Criminal Finances Act 2017 if they, knowingly or not, are involved in a supply chain involving contractor tax evasion. This is addition to onerous, uninsured, contractual indemnities recruiters may have given to their clients in respect of contractor tax and social costs.”
