Contractors are still in the dark about exactly what reporting will be required under the new Employment Intermediaries rules that come into force from April 2015. This is despite HMRC’s summary of responses to the recent consultation over the proposed reporting rules.
More positively the taxman has clarified that many of the more onerous reporting requirements originally proposed have been relaxed.
Parasol managing director Derek Kelly believes that HMRC’s response leaves key questions unanswered for both umbrella company and limited company contractors: “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.”
Kelly also notes that HMRC’s position on personal service companies (PSCs) is also open for interpretation: “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 We hope the draft guidance and legislation will address this uncertainty.”
An HMRC spokesperson told Kelly that: “Recruitment firms will need to report on workers employed via umbrella companies. However under the new specification where Pay As You Earn (PAYE) has been operated by an umbrella in the UK, we will require the worker's identity details but not payment details.”
The spokesperson added: “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 The draft guidance is due to be published on 9 February.”
The Employment Intermediaries legislation’s reporting requirements could impact on contractors in two ways. If hired via an agency, the agency is required to notify HMRC each quarter about any workers they supplied where PAYE was not operated, which potentially includes umbrella company contractors, self-employed sole traders and limited company contractors.
Secondly, contractors who subcontract other contractors to complete projects where the subcontractor is required to work on the client’s site will also be classed as an employment intermediary. Limited company contractors subcontracting in this way are classed as intermediaries and will be required to implement the reporting requirements
However, the current HMRC guidance says that if the subcontractor provides their services “from their home or somewhere that isn’t controlled or managed by the client or required by the nature of the services” then they are exempt from reporting.