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Agency Reporting Requirement: Onshore, Offshore… be sure

boat crashOn 4th September 2014, HMRC publish additional guidance on the reporting requirements referenced in previous documentation outlining the Offshore and Onshore Employment Intermediaries legislation’s.

Offshore and Onshore Employment Intermediaries: A Brief Summary

Two new pieces of legislation came into effect on 6th April 2014: the Offshore Employment Intermediaries and the Onshore Employment Intermediaries. Both pieces of legislation attempt to tackle different methods of  tax  avoidance  which  has  a  negative  impact  on  the  UK  economy. The Offshore  Employment Intermediaries tackles the avoidance of tax through the use of offshore trading structures. The Onshore Employment Intermediaries, on the other hand, tackles the avoidance of tax through the use of structures which create “false” self-employment.

Both pieces of legislation stipulate that if a loss of appropriate employment taxes arises through the use of such tax avoidance mechanisms, the entity that has the direct relationship with the end client will be responsible for the tax debt generated. In most instances, this will be the recruitment organisation.

This means that the recruitment organisation must operate Pay-As-You-Earn (PAYE) for any worker that they engage with provided that:

  • They are placed with a UK-based client
  • They personally provide their services to the client (i.e. they are not working via their own PSC)
  • They are working via an intermediary
  • They are, or can be, supervised, directed, or controlled by someone as to how they carry out the work
  • They ARE NOT already having their payments treated as employment income under PAYE

The Reporting Requirements

In order to facilitate the enforcement of the Offshore and Onshore Employment Intermediaries, recruitment organisations have a responsibility to submit quarterly reports to HMRC outlining the following:

  •  The recruitment organisations PAYE reference
  •  The reporting period for which the reports relates
  •  Details of the worker (personal details and how they were engaged to do the work: partnership LLP, Limited Company, umbrella, self-employed etc.)
  •  Assignment details (hours worked, rate of pay)
  •  Details of any other party they pay for the worker’s services (e.g. the umbrella companies details)

These reporting requirements are in addition to the RTI submission made for workers utilising the recruitment organisations PAYE mechanism and are designed to ensure that HMRC have a full picture of all transactions being made which will enable them to ensure the correct application of PAYE for workers where this is a requirement under the new rules.

Important dates for your diary

Reporting Period Deadline  to  Submit the Report Deadline  to  Replace  a Faulty Report
6th April – 5th July 5th August 5th November
6th July – 5th October 5th November 5th February
6th October – 5th January 5th February 5th May
6th January – 5th April 5th May 5th August

Why working with Liberty Bishop will make things easier

Liberty Bishop are a specialist payroll and accountancy provider for contract workers, we’ve been in operation since 1995 and provide a range of services on both a domestic (UK) and international basis.

We operate an employed umbrella solution for contractors working in the UK. Under this model we employ the worker using an “over-arching” contract of employment and deduct Income Tax and National Insurance Contributions (NIC’s) on a PAYE basis. This means that you would not need to operate PAYE for any of your  workers  using  our  umbrella  solution,  since  we  would  be  doing  this  through  our  own  PAYE mechanism. By virtue of being the employer, this also means that we take on all of the other responsibilities and liabilities associated with acting as an employer (NMW requirements, Statutory Sick Pay, Maternity/Paternity leave entitlements, Agency Workers’ Regulations, Pension Auto-Enrolment).

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