Is the taxman killing financial services recruitment firms?

25 February 2010

2 minute read

Is the taxman killing financial services recruitment firms?

On a day in which it's emerged that pre-tax profits at Hays are down an eye watering 70%, the recruitment sector clearly isn't doing too well. And Her Majesty's Revenue & Customs doesn't appear to be making matters any easier.

Hays' woes are down to declining public sector hiring rather than the UK taxman, but the same can't be said for Hexagon Human Capital. Last week, shares in the Aim listed company (which includes specialist financial services recruiter Correlate - né Alexander Mann) were suspended while it tries to work out a revised payment schedule to clear its tax arrears, rumoured to be as high as 3m.

Unpaid taxes also created problems for Napier Scott, the financial services executive search firm which was sold to Hanover Search & Selection last year. And they played a key role in the demise of Greatfleet, the IT and financial services recruitment firm which went bust in 2009 (only to re-emerge as Qualitas People Solutions).

Michael Healy of Leonard Curtis, one of Greatfleet's administrators, told us unpaid taxes often kill off recruitment firms: "One of their biggest costs is staff, so the big issue is PAYE and National Insurance. They don't pay it, and run into cash flow problems."

Last year, Healy says HMRC was fairly tolerant of late tax payments. This year, he says that's all changed: "HMRC have become more aggressive and are making sure they're aware of any underlying difficulties faced by companies before allowing them to restructure late payments."

If HMRC thinks the underlying difficulties are insurmountable, it will put recruiters into administration.

However, a director at one (well run) financial services recruitment firm says others in the industry only have themselves to blame if they run into tax troubles. "In some cases it's simply down to bad financial planning. The heads of some businesses take money out each month to buy fast cars and flash toys. We try and distance ourselves from that. There are no shortcuts to building a good business."

AUTHORSarah Butcher

Global Editor

UK
UK1
5 March 2010
Interesting that Qualitas People Solutions is also now about to go into administration, if it has not already - it would seem that privately owned firms are not that much better managed......
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Pe
Peter Dunphy
4 March 2010
I run a financial services recruitment firm, hopefully a better run one than some of those mentioned above!
I don't have sympathy for companies not paying PAYE - this simply means they are employing too many people or paying them too much, and running away from payments due is such a short term measure - the industry needed a clear out of some of the chancers and overpaid.
It also infuriates me when these losers 'phoenix' to run away from their creditors and then set up again with exactly the same failed business model. Sometimes this can protect some jobs but I would ban the failed Directors from holding office if they are involved in such practices.
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Ha
Harris
1 March 2010
The director quoted at the bottom of the article puts it very well, as does the last / latest post - too many recruitment firms are run by flash non-business types who do not put integrity first. Possibly I am biased as our last contact with the revenue was them sending us a cheque!
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gl
glad
26 February 2010
For once, I have the upmost respect for the HMRC. With the excepttion of the established few who provide a professional service, the rest deserve to be put out of business. A complete bunch of parasites, as far as I am cocerned and the less of them, the better!
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Mr
Mr Search
26 February 2010
Veritas said it perfectly. Monkeys on type writers only get you so far....
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