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New regulations will require intermediaries – typically agencies – to report the personal details of all ‘workers’ they supply to clients where employment taxes are not deducted at source. Despite strong protests from some quarters, it would appear that the regulations will also apply to independent professionals who operate through their own limited company.
Recruitment firms will need to include information on contractors employed via umbrella companies in new quarterly returns to HMRC.
However, the tax authority says it will only require agencies to provide 'identity details' for umbrella contractors. Payment details won’t need to be supplied.
Staffing firms will need to submit quarterly reports to HMRC. These returns must include detailed personal information on every contractor or temp who has been placed by the agency during the previous quarter, but is not paid via its own PAYE scheme.
IPSE - Burdensome
Freelancer and self-employed group, IPSE, warned the Government that the new reporting requirements will be burdensome for businesses and will distort the contractor market place. This follows the onshore intermediaries’ legislation introduced last year.
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He said: “The original proposals required intermediaries to report on individuals for three years, even if the engagement only lasted a few weeks. This was ludicrously excessive, as we pointed out to HMRC, and we are pleased this has been dropped to one year.
“We are also pleased to see that some personal details such as title, hours worked and passport number are no longer required. These are important concessions but they do not address the inherent impropriety of the regulations, particularly with regard to the way they impact limited company contractors.”
IPSE believes where the ‘worker’ operates through a limited company, the reporting should be restricted to company information only. This would reflect the business to business nature of the contract with the agency and it would be in keeping with HMRC guidance on how the legislation interacts with these professionals.
As it stands, the regulations will force agencies to ask limited companies to supply personal details of their directors which includes their national insurance number. IPSE believes it is entirely inappropriate for one business to ask another for the personal details of its employees and then report those details to HMRC.
Sub-contracting
Mr Chamberlain says the new regulations will also prevent professionals from subcontracting.
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IPSE believes HMRC has not properly considered the consequences of the legislation.
Mr Chamberlain said: “We have clearly told HMRC, both in our written responses to the various consultations and in face to face meetings, that these rules will be damaging for limited company contractors and the agencies that place them. We have asked them why limited companies cannot be carved out from the reporting requirements, particularly as including them protects absolutely no revenue.
“We haven’t been satisfied with the answers they have given which is why we are now seeking a legal view. IPSE has engaged solicitors to examine the possibility of challenging the legislation. They are seeking answers from HMRC on IPSE’s behalf.”
giant - Reasonable
Umbrella employment specialist, giant group, was more positive about the proposed changes to intermediary reporting legislation.
Managing director, Matthew Brown, said: “HMRC has shown how reasonable it can be with these changes. While the first draft left a lot to be desired, it’s encouraging to see them respond constructively to informed industry feedback.
“Many of the requirements from the first draft which were widely considered to be too onerous have now been removed. However, agencies dealing with contractors who are either self-employed or, it appears, operating through a PSC will still need to report well over a dozen pieces of information.
"What appears at first reading to be the really good news is that where a contractor is covered by PAYE when operating through an umbrella company, an intermediary agency will only have to supply a worker’s identity details and not their payment details. This would remove a significant burden from agencies and allow them to focus on their key priority of providing great service to both clients and candidates."
Parasol - clarification
Parasol, umbrella employers for contractors, has already sought clarification from HMRC following the publication of the report.
In response to representations made during the consultation, HMRC has 'removed the need' to report worker title, hours worked, passport number, National Identity Card Number and – where a National Insurance number is provided – the need to report date of birth and gender.
However, Parasol managing director Derek Kelly claimed the document left several key questions unanswered for recruiters.
He said: “We didn’t feel that the document provided sufficient clarity and certainty as to whether staffing firms will need to include contractors in quarterly returns to HMRC.
“The crucial paragraph regarding contractors employed via umbrellas (point 2.17) was open to interpretation, and failed to make clear whether or not these individuals are covered by the reporting requirements placed on agencies.
“That’s why we asked HMRC for further information.”
A spokesman for HMRC told Parasol: “Regarding paragraph 2.17, yes recruitment firms will need to report on workers employed via umbrella companies. However under the new specification where PAYE has been operated by an Umbrella in the UK, we will require the worker's identity details but not payment details.
“The accompanying technical specification will be published fully on the website early next week after we talk to software developers on Friday. The draft guidance is due to be published on 9 February.”
Derek added: “HMRC has sought to provide some clarity for limited company contractors such as those served by our sister company, ClearSky Contractor Accounting.
“However, it is still unclear whether agencies will need to report on personal service companies (PSCs). We hope the draft guidance and legislation will address this uncertainty.”
APSCo - Welcome
Agency group, the Association of Professional Staffing Companies (APSCo) says it is pleased that the Government has listened to its concerns relating to the level of personal information required and the excessive length of time during which intermediaries had to report on individuals.
Samantha Hurley, from APSCo said: “I welcome the fact that, following our strong response to HMRC on behalf of our members, it has listened and reduced reporting requirements for intermediaries. Of particular concern to APSCo was the intended requirement for our members to collate sensitive personal data and information (such as date of birth and gender), which had the potential to give rise to discrimination claims.
“HMRC has acknowledged this and, as a result, made a number of changes to the reporting requirements, which remove the need to report worker title, hours worked, passport number, National Identity Card Number and, where a National Insurance number is provided, the need to report date of birth and gender. While we do not underestimate the difficulties our members may encounter getting NI numbers from personal service company contractors, we believe it to be far better than the original proposal. It is, however, vital that intermediaries are aware that these changes do not remove the need for careful consideration surrounding the data security of information coming into, and being stored, by their business.”
APSCo also said that HMRC also to have taken on board its concerns regarding the level of duplication of information requiring reporting and the length of time that a nil return was needed after a contractor had finished working for an intermediary that featured in the draft legislation.
Ms Hurley said: “HMRC’s original proposal meant that recruitment firms would have to report on information already reported on the RTI returns of intermediaries further down the supply chain that employed the workers. HMRC has taken note and subsequently reduced the scope of reporting so that although it will require details of employed workers (not the recruitment firm’s employed workers), i.e. umbrella workers, it will only require the intermediary to report on payments for those contractors it has engaged where PAYE has not been operated including those engaged through offshore intermediaries.
“Regarding the length of time that a nil return is required after a contractor has ceased working for an intermediary, HMRC has listened to our view that this seems extremely unfair and subsequently reduced it from three years to one year. However, it is important to take note that there will still be a penalty regime in place for incorrect returns.
“While these changes are not all that we may have hoped for, we appreciate that HMRC has made significant changes – something we believe is a reasonable compromise and will benefit our members”.
Unless the draft legislation is further amended, the new reporting regulations will come into effect from April this year.
HMRC's response document is available here.
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Susie Hughes © Shout99 2015
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