Employment intermediaries reporting

Employment intermediaries connect workers with end clients on temporary contracts, frequently through personal service companies (PSC’s). This concept provides workers with flexibility and supports both business growth and the UK economy. However, the growth of employment intermediaries and the rise in false self-employment means that income tax and NIC are often not met. To help address this issue, In April 2015, the government made it mandatory for the employment intermediaries to disclose information on their non-PAYE employees to HMRC in quarterly reports. The new reporting requirement is backed by a penalty regime for late, incomplete, or erroneous reporting.

If you have any intermediary reporting requirements, we can be of great help with the reporting. As seen in several cases, the UK legislation wants recruitment agencies to report all the assignments placed to the workers to HMRC. If the workers are on agency payroll, then their reports should be sent to HMRC on a weekly basis using RTI reporting (if payment is made weekly). However, the workers are getting paid through some other alternative like a PSC, or CIS scheme or an umbrella, then the reporting of the payment must be done quarterly to HMRC.

1. What is an Employment intermediary?
2. Why was the Employment intermediary rules introduced?
3. Whom do Employment intermediary rules affect?
4. Information HMRC will ask you to process Employment Intermediaries Reporting
5. What does a business need to consider?
6. Who doesn’t it include?
7. Reporting periods and submission deadlines for Employment Intermediaries Reporting
8. What penalties may you face if you are late in sending reports?

What is an Employment intermediary?

Any person who arranges for an individual to work for a third party or pays for services performed for a third party is considered an intermediary. Additionally, an employment intermediary is referred to as an agency. Intermediaries must return information on all workers they place with clients in cases where the intermediary does not use Pay As You Earn (PAYE) on the workers' payments. You must provide HMRC with the report (or reports) at least once every three months. Intermediaries can decide how often you upload and submit reports. This could be weekly, monthly, or once each period, depending on how they work.

Why was the Employment intermediary rules introduced?

The government announced legislation to crack down on the use of 'Fake self-employment' models, in which workers and employers avoid paying taxes they should be while also abdicating other employment responsibilities.

To Whom does Employment intermediary rules affect?

The rules took effect on 6th April 2014 and are applicable to the following:

1. Self-employed contractors who are employed through 'intermediaries' and are currently subject to self-employment taxes.
2. Businesses that act as 'intermediaries.'

Information HMRC will ask you to process employment intermediaries reporting

Below mentioned are the important information that HMRC will need from you to process the reporting. This will only make your life smoother and happier.

Details of Employment intermediaries

• Name
• Address
• UTR number of your agency.

Worker details:

• Name
• Address
• DOB
• Gender
• NI number

Details of worker engagement

1. Start and end date of assignment
2. Payment details (including VAT)

It is expected that almost all the agencies would be having this information. Only information that they might not have is the NI number because the workers are not directly paid by them. We have contracts with our workers hence we are able to give information to agencies.

The information is downloaded in the same format as it is asked by HMRC hence it is easier for us to submit the information they seek. The information report can be downloaded any time and checked before sending it to HMRC as a part pf of quarterly process.

What does a business need to consider?

Businesses must consider the following:

1. Do they employ off-payroll workers (subcontractors) to carry out customer contracts?
2. Are workers paid without deductions for PAYE and NICs?

If either of these questions is yes, you may be classified as an intermediary.Intermediaries include employment agencies, umbrella companies, and certain payroll companies. Nevertheless, this is a rather broad definition.

You must submit an Employment Intermediary Report to HMRC if all of the following conditions apply at any point during a reporting period (quarterly).If you –

1. Are an agency or intermediary that supplies individuals' services to a client.
2. Possess a contract with a client or clients.
3. Deliver the services of more than one worker to one or more clients as a result of your contract with those clients.
4. Deliver the worker's services in the United Kingdom - or, if the worker's services are provided overseas, the individual is a resident of the United Kingdom.
5. Make a payment for the services in one or more instalments (including payments to third parties)

Thus, consulting service companies, facility management firms, the events industry, the hospitality sector, the care sector, and the audio-visual industry are all examples of businesses that provide workers to another businesses. Additionally, it covers personal service companies that subcontract and/or supply a client with more than one worker.

If you did not supply workers during a certain quarter, you must submit a 'nil report' by the due date.

When there are many intermediaries in the chain, the intermediary who distributes the workers to the customer is responsible for filing the report with HMRC if PAYE is not used.If the intermediary supplies workers to another intermediary, they must give information about the workers to that intermediary rather than to HMRC.

Who doesn’t it include?

When the intermediary does not operate PAYE for the workers, the intermediary must report to HMRC. This report must include information about overseas workers who are subject to UK tax or payments made while the worker is performing services in the UK or temporarily abroad.

The report does not require details for workers who:

1. are not required to pay tax in the United Kingdom.
2. are your own employees.
3. are unable to find work for during a reporting period or are not paid during a reporting period.
4. deliver their services totally from their own home or non-client-managed premises - unless required to do so by the client's services and job.
5. are actors, singers, musicians, or other entertainers, or they are models for fashion, photography, or art.

Limited companies or personal service companies that provide a client with a single worker are not required to file a report. However, if the personal service company supplies more than one employee and is not registered for PAYE, they must report to HMRC.

Reporting periods and submission deadlines for Employment Intermediaries Reporting

Below table will help you understand the important dates for reporting and the deadlines too. You should keep yourself aware of these dates if you are into agency recruitment.

For any kind of help regarding intermediaries reporting, you can contact us or even send a mail to us with your requirements. You will get the response from our team within 24 hours. We are constantly working to improve the process and make our workers life easier by removing the hurdles on their ways.

What penalties may you face if you are late in sending reports?

If a report is submitted late, fines are automatically assessed based on the number of late reports received during 12-months:

1. £250 for a first offence.
2. £500 for a second offence.
3. Subsequent offences are subject to a fine of £1,000 each.

If 12 months have gone between late reports, the penalty clock resets, but persistent failure to submit reports on time may result in additional penalties of up to £600. The intermediary has a right of appeal to HMRC against erroneous penalties.

For any kind of help regarding intermediary reporting, you can contact dns on 03300 886 686 or email enquiry@dnsaccountants.co.uk.Book a free consultation now to know more about employment intermediary reporting.

About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.