The following information provides a brief guide to the legislation:
HMRC deemed that new legislation was necessary to attack the avoidance of Income Tax and National Insurance Contributions (NICs) via schemes that involved the use of offshore companies or employment intermediaries supplying workers to an end user via a UK intermediary (i.e. a recruitment agency).
Over the course of time, offshore intermediaries had utilised existing legislation whereby they were outside of the HMRC reporting loop and their schemes may not be liable for Income Tax & NIC deductions. Problems existed because it is the UK based intermediary who has ultimate responsibility for deducting PAYE and NIC - under the existing rules however, many were oblivious that an offshore intermediary was involved in supplying the worker and they were (innocently) unaware that they were failing to meet their statutory obligations.
The new legislation is designed to make the UK intermediary (the last in any chain of intermediaries) which is involved in the supply of the workers the employer for PAYE and NIC purposes.
In circumstances where there is no UK based intermediary, the UK based end user will be responsible for the PAYE and NIC deductions of the worker.
Note - there is a special certification arrangement to make the process simpler for companies licensed to carry out oil and gas exploration activities on the UK continental shelf.
Reporting to HMRC
In April 2015 HMRC implemented a second phase to the legislation and now require UK intermediaries to liaise with them on a quarterly basis to report on all workers who they do not directly pay themselves.
This includes individuals who work via Umbrella companies, those who are Self Employed and contractors who own/operate Personal Service Companies.
The intermediary will be required to provide HMRC with the following data:
- Worker name and National Insurance number
- Worker Date of Birth and Gender
- Worker Address and Postcode
- Details of how engaged (Self Employed / Umbrella/PSC)
- Start date and end date of engagement
- The fees, currency and whether VAT is included
- Name, address and Companies House registration number of the company paid by the agency for the workers servi
If the worker is engaged on a Self Employed or PSC basis, the following additional information must also be provided:
- Unique Taxpayer Reference (where self-employed or a member of a partnership)
- Amount paid for the workers services inclusive of VAT
- Has income tax been deducted from these payments
Reports must be filed quarterly according to a schedule set out by HMRC. If the reports are late, incomplete or incorrect, the recruitment agency can be fined £250 for the first offence, £500 for the second offence and £1,000 for the third and subsequent offences.
It is now more important than ever before for intermediaries to understand exactly how their contractors provide their services while based on assignment. Umbrella, PSC & Self Employed models are still very prudent options for many contractors but it is now essential for all parties to carry out a certain level of due diligence to ensure compliance with the legislation.
For more information and advice simply request a call back or contact one of our advisors on 0161 703 2549. Alternatively please email us on firstname.lastname@example.org.
Disclaimer: The above information does not constitute professional advice, only general information.