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).