Accounting Blog

HMRC’S NEW ON SHORE INTERMEDIARY REPORTING REGULATIONS

On 6th April, 2015, new legislation came into effect which requires intermediaries supplying temporary labour to report to HMRC details of all workers they have placed with clients and who are not on their own PAYE payroll.

WHO DOES THE LEGISLATION APPLY TO?

The legislation affects anyone who is involved in supplying temporary labour, including personal service companies supplying more than one worker, if the following criteria apply at any time during a ‘reporting period':

  • You are an agency; and
  • You supply more than one worker’s services to a client by virtue of a contract between you and that client; and
  • You provide the worker’s services in the UK or, if the services are provided overseas, the worker resides in the UK; and
  • You make one or more payments for those services, including payments to third parties.

The reporting periods are quarterly, the first of which runs from 6th April, 2015, to 5th July, 2015.

 

WHAT EXCEPTIONS ARE THERE TO THE REPORTING REQUIREMENTS?

The reporting requirements introduced by the new legislation do not apply in respect of:

Personal Service Companies who supply a client with only one worker. If, however, a PSC supplies more than one worker, including subcontracted workers, then the new legislation applies and quarterly reports must be made.

Workers supplied by an agency who provide their services at sea in the oil and gas sectors wholly on the UK continental shelf.

Workers who are directly employed by an agency.

In addition, agencies do not need to include payment details in their reports in respect of workers to whom payments have already been included as a part of a PAYE Real Time Information submission by any other organisation.

WHAT INFORMATION MUST BE INCLUDED IN THE REPORT?

There are two elements to the report: personal details and payment details.

The following personal details for all workers who personally provided their services to the client must be included in the report:

  • Full name, address and postcode.
  • National Insurance number, if the worker has one.
  • Date of birth and gender, if the worker has no National Insurance number.

The payment details that must be reported include:

  • The reason (selected from one of six options) why the agency didn’t operate PAYE on payments to that worker.
  • The worker’s unique taxpayer reference, if the worker is self-employed or a member of a partnership.
  • The date on which that worker started work with the client;
  • The date on which the worker ceased to work for that client (if applicable);
  • The total amount paid for the worker’s services in terms of the contract, including expenses and VAT;
  • The currency (Sterling or Euros) in which payment was made. Payment in all other currencies must be converted to Sterling or Euros using exchange rates stipulated by HMRC.
  • Whether or not VAT was charged on the payment.
  • The full name and trading address of whomever the agency paid for the worker’s services.
  • The company registration number if the worker was engaged to do the work through a limited company.

WHEN MUST REPORTS BE MADE?

Reports must be made within one calendar month of the end of each quarterly reporting period. The deadline for the first reports is therefore 5th August, 2015. A report can be replaced provided that the replacement report is lodged with HMRC before the next reporting period’s deadline.

WHAT RECORDS MUST BE KEPT?

HMRC may require an agency to prove that the information reported to HMRC was correct, so an agency must be able to produce records and documents that verify the accuracy of the information reported by it. The onus is on the agency to acquire and retain this information. It should be retained by the agency for at least three years after the end of the tax year that the report relates to. HMRC will require to be satisfied that the agency did not have to operate PAYE on payments made to a worker, so an agency will need to be sure that it retains information which establishes why it didn’t need to operate PAYE for that worker.

WHAT PENALTIES MAY BE IMPOSED BY HMRC?

If a report is late, incomplete or inaccurate then the following fines will automatically be imposed:

First offence £250

Second offence £500

Third and subsequent offences £1000

The fines tariff resets if twelve or more months pass without any reporting offences having been incurred.

If there is a continued failure to send reports or reports are consistently sent late then a penalty may be imposed for every day that a report is overdue.

In the case of incomplete and incorrect reports, manual penalties may be applied on a case-by-case basis.

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