Onshore Intermediaries Explained

On 6 April 2015, the recruitment landscape shifts once again.

For those of you who provide temporary contractor services, you will be caught by the Onshore Intermediaries Legislation.

Having been introduced around twelve months ago, this legislation is designed to prevent the perceived increase in false self-employment and the supply of workers through offshore locations. The new regulations will help HMRC penalise agencies that do not comply with existing legislation, it is expected to reduce unfair commercial gains, it will help support agencies that do comply and HMRC will increase their ability to collect the right amount of Tax and National Insurance that falls due.

The system of reporting will involve quarterly returns being made to HMRC, with the first quarter end being 5 July 2015. Within these returns you will be responsible for the delivery of information to HMRC regarding all non-PAYE temporary workers. You should report all transactions with self-employed contractors, those with limited companies as well as payments to umbrella companies.

The reporting process is prescribed and made through HMRC’s gateway and in each instance, you will need to provide HMRC with the following details:

  • Worker’s full name, address and postcode
  • Worker’s National Insurance number, or
  • Date of birth and gender if they don’t have a National Insurance Number
  • Worker’s unique tax reference number
  • Worker’s start date and end date
  • A reason why you have not operated PAYE on the worker
  • Total payment made including expenses and VAT
  • The currency of payment
  • Companies House registration number, if engaged through a limited company

If you haven’t started gathering information already, I would recommend you commence asap.

You will need systems to capture this data and, if you do not have adequate systems in place, immediate action is needed. Those who use electronic timesheets management software or outsource your back-office department to an external provider may be ahead of the game, as the matter should already be in hand. However, for those of you who maintain your back-office in house, using manual or very basic computerised systems, you will need address this matter urgently.

The penalties for late or incorrect filing are relatively strong, being £250 for the first offence, £500 for the second and £1,000 for the third and further offences within a twelve month period starting from the first offence.