Employment Intermediaries: New reporting obligations
Earlier this year new reporting obligations were introduced under the “Employment Intermediaries” legislation.
Purpose of the legislation
The legislation requires an intermediary to provide HMRC with details of any workers it supplies to clients where PAYE is not being applied to the payments made to the worker. The main target of the legislation was intended to be employment and placement agencies.
The unintended target of the legislation
It is now apparent that the legislation extends beyond the wider group of employment agencies and this note considers the position as it relates to the professional services sector. The following are two examples of situations which are potentially caught by the legislation:
Services of a partner or a member of an LLP, or a director of a company who acts as a Non-Executive Director, Director or Trustee and the fees are paid directly to the partnership or company, as opposed to the individual directly.
Where within an LLP structure there is a service company (normally the service company retains the employees’ employment contracts and provides the services of the employees to clients of the LLP), but it also provides an individual’s services are to the LLP (and its clients) and PAYE is not applied to the payments received by the individual.
Based upon the above, the partnership, LLP or company is caught by the legislation and needs to submit quarterly reports to HMRC.
The arrangements set out within Example 1 above are not uncommon. There is a longstanding Extra Statutory Concession in place where, so long as all of the conditions are satisfied, then payments of director’s fees paid so a professional partnership or company can be paid without the need to operate PAYE.
We recommend that HMRC are approached to seek their agreement that where payments are being paid in accordance with the Extra-Statutory Concession, those arrangements should not be reported under the Employment Intermediaries legislation.
However, where Example 2 is in point, there is at present a requirement to submit a quarterly return to HMRC. Details of the information which needs to be declared can be found at: https://www.gov.uk/government/publications/employment-intermediaries-report-template
Whilst the filing deadline for the quarter ended 5 October 2015 is 5 November, we understand that HMRC are unlikely to seek a penalty where the reporting intermediary is in the process of introducing a system to ensure it is going to meet all future reporting obligations.
Please do not hesitate in contacting Nick Bustin, Director of Employment Tax, on 020 7969 5578 or via email firstname.lastname@example.org or your usual haysmacintyre partner in order to discuss matters further.