Are you affected by the new employment intermediaries rules?

In April 2015, HMRC introduced new reporting requirements for employment intermediaries where payments are made to workers without the deduction of PAYE and National Insurance.

These new requirements will apply to any business in any sector that supplies non-employee workers who then personally provide services to the businesses clients. If you do supply individuals, who are not on your payroll, to provide their services to someone else, say your client, then you could be classed as an employment intermediary and affected by the new rules.

However, reports will only be required if you have engaged more than one non-employee worker (either in their own name or via a service company) to carry out work for your client as in effect you have contracted with your client to provide those workers services.

 

Personally providing services

It is necessary to understand when a worker is deemed to be personally providing services to your client. It may be of assistance to question exactly who is the worker ‘working for’. If the worker is working for the client and under their control and management, they are likely to be regarded as personally providing services to the client. If they are under your management and control, they are likely to be regarded as working for you and personally involved in the provision of the service to the client but not personally providing the service! The payments to the former will need to be declared whereas the payments to the latter won’t.

However, even if the worker is personally providing services but isn’t subject to any supervision or control, the payments made to them by your business need to be included on the quarterly return.

In practice, any person or business who supply more than one worker to work for the client is caught by the reporting requirements of the legislation and is required to make a return to HMRC.

 

Who else may be affected?

Amazingly professional partnerships could be caught if they second a partner to a client as the rules require you to include the partner in quarterly returns. It seems an absurd situation that a partner receiving a profit share could be subject to PAYE and NIC on the fees received.

In addition, those workers who are reported under the CIS obligations are not excluded from reporting as only employees taxed under PAYE are excluded.

 

Why is the reporting necessary?

The idea of the requirements is to give HMRC greater visibility of the payments made to workers not on the payroll which could result in them challenging the workers tax status if they are either declaring that they are self employed or operating their own limited company.

 

What about personal service companies (PSCs)?

PSCs that only supply a client with 1 worker, usually the director, do not have to send reports to HMRC.