New reporting duties for employment intermediaries
23rd March, 2015
HMRC has introduced the Income Tax (Pay As You Earn) (Amendment No. 2) Regulations 2015 as a mechanism to gather information from employment intermediaries to assist in the continued clampdown on false self-employment and abuse of offshore working.
What has changed?
From 6 April 2015, where the intermediary does not operate Pay As You Earn for the workers it supplies, it will need to provide to HMRC the personal details of the workers supplied, details of the payments made to those workers and the reasons why they didn’t operate PAYE.
Who is affected?
- are an agency
- have a contract with a client
- provide more than one worker’s services to a client because of your contract with that client
- provide the worker’s services in the UK – or if the services are provided overseas, that the person is resident in the UK
- make one or more payments for the services (including payments to third parties)
then you are caught by this new reporting requirement.
For example, if you have a contract to supply workers to a client and you arrange this engagement through an umbrella company which operates PAYE for the workers it supplies to you; it is the agency’s statutory duty to report to HMRC on the workers and the payments made for the workers supplied to the client.
Similarly, if you engage with a limited company, including personal service companies, in order to provide workers to your client, details of these workers must be included in your report.
However, you don’t need to send HMRC reports if:
- you are a UK employer and you supply workers to provide their services to end clients and nobody else is involved, and you operate PAYE when you pay those workers; or
- the workers you supply provide their services at sea in the oil and gas industry wholly on the UK continental shelf, you don’t need to send HMRC reports.
When is the first report due?
The first reporting period is between 6 April and 5 July 2015 with the first report to be submitted for this period, on or before 5 August 2015.
The reports must be made to HMRC online once every 3 months as per this schedule:
Reporting period: 6 April to 5 July – Deadline date: 5 August
Reporting period: 6 July to 5 October – Deadline date: 5 November
Reporting period: 6 October to 5 January – Deadline date: 5 February
Reporting period: 6 January to 5 April – Deadline date: 5 May
How do I submit these reports?
HMRC is devising an online service for intermediaries to upload and send the required reports to HMRC. The reports must also be submitted using a standard template which can be found by clicking here.
If the report is not submitted by the relevant deadline, or is incomplete or incorrect, you may receive a penalty.
Penalties are calculated on the number of offences committed in a 12 month period and can be automatic, ranging from between £250 for a first offence to £1,000 for a third or later offence.
What action do I need to take?
You should begin to consider which of your client contracts will be affected by this duty. For many agencies this change will add another reporting responsibility to the list, but shouldn’t be too onerous.
However, if you are not already in possession of the information you need to submit to HMRC, not only should you begin to collate this, but you should think about revising your contracts to ensure you are able to obtain this in advance of the deadlines.
You should ensure that the umbrella companies, limited companies, personal service companies, second tier agencies with whom you contract with are required to provide you with the necessary information on the workers they supply to you and that any penalty the agency receives for failure to accurately report to HMRC can be passed on to this organisation.
In addition, if some of your contracts with clients do not meet the conditions requiring you to report to HMRC, you may need to obtain evidence from the client to prove this to HMRC.
Finally, a system for retaining the records and documents which prove that the information sent to HMRC was correct should be established.
This includes documents that show why you didn’t operate PAYE on the worker’s payments which must be kept for at least three years after the end of the tax year that they relate to.
Further details on this new system, can be found by clicking here.
If you have any questions on how you may be affected, please get in touch.