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Employment Intermediaries legislation: Who will be caught by the changes?

29th May 2015

The Finance Act 2014 introduced new legislation to counter a perceived loss of tax and National Insurance (NI) on payments made to workers who are contracted through some form of intermediary or agency. 

The legislation considers two separate issues where the intermediary or agency is based: “Offshore” (for example, Jersey or the Isle of Man) and “Onshore”. The legislation which came into effect from 6 April 2014 is seeking to ensure that PAYE and Class 1 National Insurance (“NI”) is applied at some point on the income paid to the worker.

We consider the position in respect of an “Onshore” intermediary or agency.

Who will be caught?
The legislation has far wider implications than people may think. Whilst there is no question it includes agencies, it also includes any intermediary who is involved in the provision of a worker to an end-user client and the worker is paid for the provision of their services. 

However, the legislation does not apply where the worker is not under the supervision, direction or control by any person. Consequently, it is necessary to consider all of the facts relating to any engagement before determining whether you will be regarded as an intermediary for the purposes of the legislation. 

Where the entity is seen as an intermediary or agency, as defined by the legislation, then it will be required to operate PAYE and NI on the payments made to the worker, or ensure the payments are liable to PAYE and NI at some point. 

The intermediary, or agency will need to provide details of the payments made to a worker where PAYE/NI is not applied at the time the payment is made to the worker.

HMRC have confirmed that if the intermediary only introduces workers to clients or they supply workers to other intermediaries, and the entity is not involved in any subsequent arrangements, then they (the entity) are not caught by the reporting obligations which came into effect from 6 April 2015. 

Furthermore, the reporting obligations will not apply in respect of the entity’s own employees.

Quarterly reporting 
Reports must be submitted on a quarterly basis, with the first reporting period being 6 April to 5 July, which will need to be submitted to HMRC on or before 5 August 2015. Details will need to be included within HMRC’s template:

Where any report is submitted late, or is incomplete then an automatic penalty may be imposed. There is also a requirement to keep records for at least three years after the end of the tax year.


For further guidance on how the reports will need to be submitted, please contact Nick Bustin.

Employment Tax Director
Tel: +44 20 7969 5578