There is plenty to think about when setting up your recruitment business, and lots of things that quite frankly you are better off leaving to the experts.
However, this of course opens up the potential of being mis-sold products that you either don’t need or aren’t right for your business.
A common example of this is contracts sold by funders that give the recruiter the ability to piggyback on their UTR (Unique Tax Reference) number and use their gross payment status. Now, understanding this and the reasons you may or may not want to take this route is important and something you’re going to want to get right from the offset!
If your business recruits within the construction sector, your business is a CIS (Construction Industry Scheme) subcontractor and will need to obtain ‘gross payment status’ in order to invoice your clients. Unfortunately, HMRC don’t just give you gross status, there are rules around it and once you are eligible it usually takes a few months to acquire – a timeframe that is of course not feasible to work within for a new company just starting out.
Without gross status, your clients would need to apply either a 30% or 20% reduction to every invoice – a disaster for the cashflow of any agency, let alone a start-up. Not many are aware that this deduction can be offset from their monthly PAYE bill or corporation tax bill at the end of the year, BUT it’s very unlikely to be relevant to new recruitment companies as it’s rare to pay yourself any PAYE salary.
The good news for construction recruiters is that there is a solution for this! Until you obtain your gross status you can use the Quba Principalcontract – you use our UTR and our gross status meaning you can start invoicing straight away. Quba Solutions are in principal contract with client and the agency acts as our agent. The only downsides to this is that the turnover is attributed to Quba (only the margin value to the agency), and invoices are dual branded. This is not exclusive to us; in fact, this is the only type of contract offered by many funders in the market.
However – it makes NO SENSE for a construction recruitment business to stay on this type of contract past year one.
If you recruit in education, marketing, finance, IT or in fact ANY sector outside of construction, it makes no sense to set up like this – you would wilfully be placing brand identity and turnover into the hands of your funder without any cause and effectively become an agent of the finance company.
There is a much better way!
With our Agency Principal contract you will ensure that you’re building your brand identity from day one as well as ensuring your turnover is actually yours. Opting for anything other than this if you’re starting up a recruitment business in any industry other than construction would really be a mistake and a real case of you being mis-sold to.
Funder led contracts like Quba Principal are great products that are specifically designed to get around the issue of GROSS Status for construction start up agencies – whether this is right for you or not, it is important to set up with your eyes open and understand the different implications!