Onshore Intermediaries Reporting Requirements
The reporting requirements for ‘Onshore Intermediaries: False Self-Employment’ legislation will come into force on 6th April 2015 and have effect in relation to tax quarters beginning on or after that date.
Who should file a return?
Under the legislation, “Intermediary 1” has the duty to file the return. That is the person who is supplying the worker to the client. The reporting requirements link directly back to the onshore intermediaries’ legislation, this means that if you are potentially within the ambit of the legislation then you must file a return.
There will clearly be those that must file a return (agencies for example) and those that do not (Personal Service Companies that only supply one individual). However, there still remains a grey area with certain companies as to whether they are an “intermediary” for the purposes of the legislation. It should be noted that the definition of an “intermediary” is not restricted to agencies in the traditional sense. If you are unsure whether you are caught within the definition, you should seek advice on your position.
Where the agency is not using any intermediaries (including umbrella companies) and is already declaring under RTI all the payments it is making to its workers, then no return is due.
The return
If you are filing a return you will need to include your own details and the personal details of the individuals supplied to the client (who are not included on your own RTI return).
Where an agency is using an intermediary (such as an umbrella company) and the intermediary is already operating RTI on the payments made to the workers, the agency does not need to report the payment details. However, the agency would still need to file a return including the personal details of each umbrella worker.
Where the agency is returning payment details, the return form requires the agency to give reasons why the agency has not operated PAYE on the payments. You can select one of the six options HMRC has provided which include ‘A. Self-employed’ to ‘F. Another party operated PAYE on the worker’s payments’.
HMRC’s guidance went beyond the scope of the legislation; the legislation requires the total payment figure to be set out in the return whereas HMRC’s guidance required a breakdown of payments made to each individual. HMRC have updated their guidance; the updated guidance now provides that you can combine the arrangements into a single record with a single payment or if you wish you can separate each payment (but this is no longer mandatory).
Penalties for failure to file a return
The penalties are:
- £250 – first offence
- £500 – second offence
- £1,000 – third and later offences
If there are 12 months or more between offences, you will only be charged £250 for the first offence in the new 12 month period.
Finally, you must keep the records for three years after the end of the tax year to which they relate.
For further information please contact us on 01908 533255 or email us [email protected]