'Intermediaries' or agencies supplying workers to an end user, are required to submit quarterly returns to HMRC where payments have not been subject to PAYE and National Insurance Contributions (NICs). HMRC has the power to obtain information under The Income Tax (Pay As You Earn) (Amendment No. 2) Regulations 2015 rules, which impact:
There are statutory penalties of up to £1,000 for late reports, with possible tax-based penalties for incomplete or incorrect returns.
The answers to the questions in the headline have taken on a greater importance recently as HMRC has been surprised that it has not received as many returns as it expected, following the change in rules back in April 2015. What is clear is that there has been a significant rise in intermediaries and 'false' self-employment situations, but these rules do not appear to have been widely publicised either within or outside of HMRC.
Additionally, the recently closed consultation on 'off payroll' in the private sector has generated a lot of press coverage and, if new rules are introduced which mirror the 'off payroll' in the public sector rules, one of the first places HMRC will review will be 'intermediaries' reports.
Any organisation which provides workers' services as part of a supply chain (who are not on the payroll) will need to consider if they have a reporting obligation in light of the new rules.
Specified intermediaries can range from large organisations to small enterprises and individuals, where workers are supplied to the end client. This applies across all sectors of the labour market.
You must send a report to HMRC if at any time in a reporting period you:
Where there are a number of parties providing workers in the contractual chain, the HMRC reporting obligation rests with the final intermediary/agency before the end user ('Intermediary One').
Where there are several intermediaries in the chain, each will need to contact the next one down in order to request the above information to enable 'Intermediary One' to submit the return.
This applies even if you withhold tax under the 'Construction Industry Scheme' (CIS). However, if the workers you supply provide their services at sea in the oil and gas industry wholly on the UK continental shelf, you will not need to send HMRC reports. The new reporting requirement also does not apply where there are special exemptions for certain types of workers, such as actors, entertainers, photographic or artists; models, or services provided wholly at the worker's own home among others.
If you supply workers you could find that the rules introduced in April 2014 apply and you are required to operate PAYE/NIC, this applies where:
The fact that a worker may be exercising a profession, chargeable as trading income with liability for Class 2/4 NICs, in respect of certain engagements the worker undertakes, is not in itself sufficient to take that individual outside the scope of these requirements.
The fact that workers are professionally qualified, skilled or experienced may mean they are not, in practice, subject to detailed supervision, direction or control. In this case there will usually still be a right of supervision, direction or control which can be exercised on the rare occasion when the need arises.
If you do not have a PAYE/NIC obligation under these rules then the intermediaries reporting needs to be considered.
More information can be found on HMRC's website.
Any workers (self-employed), including partners within a partnership and limited company directors, who personally provided their services to a client through you.
The quarterly reporting regime has applied from 6 April 2015. This requires you to specify the reason why you are not required to operate PAYE and NIC on payments. The detailed return includes data requirements on the worker and on payments made. The return must be in the required format and uploaded to the HMRC website.
More information can be found on the gov.uk website.
|Reporting period||Deadline for filing a return||Deadline for replacing a return|
|6 April – 5 July||5 August||5 November|
|6 July – 5 October||5 November||5 February|
|6 October – 5 January||5 February||5 May|
|6 January – 5 April||5 May||5 August|
An information return can be amended or replaced until the end of the next tax quarter.
Organisations using off payroll workers should regularly review their procedures to determine if they have a reporting requirement, either in providing workers to others or even between connected organisations.
If the answer to all of these questions is yes, then a report may be required and the organisation should review the rules if needed. They should set up a process for capturing the required information on a regular basis in order to determine on each occasion if a quarter return is required.
HMRC has set up a special unit to review these new returns (with appropriate software) and to focus on intermediaries generally. The returns do give HMRC greater visibility of the payments made to workers outside of payroll, which could result in status enquires being conducted on the intermediary where workers are engaged on a self-employed basis, or on any Personal Service Companies via IR35. Organisations unsure about their reporting obligations should seek specialist advice where necessary.
This article first appeared in Global Payroll Association in August 2019.