Agency Returns

Q. I’d like ask about the HMRC intermediaries quarterly report that CW reported, Penalties now automatic for employment intermediaries.

It is true that HMRC have imposed a quarterly report on intermediaries which contains a lot of personal data. The agencies themselves don’t understand the legislation, and in part this is because HMRC themselves don’t understand it.
 
I was recently offered a contract by a large agency which contained a clause that suggested that I supply all the personal details, national insurance number, personal HMRC PAYE reference, DOB etc, and it went on to state that when they submitted the report that if there was any error or they filed late, that me as the (obviously stupid) contractor would allow them to charge me the amount of the fine plus a fee to be determined solely by the Agency.
 
First of all if the “business entity tests” of recent years are directed solely at the contractor to demonstrate risk, by the same token how is the Agency really a business when ALL of their risk is carried by the contractor?!
 
Herein lies the rub. I read the intermediaries legislation and found that the agency does not actually have to submit a report where:
 
You don’t have to include details of workers who:

• don’t have to pay tax in the UK
• are your own employees
• you don’t find work for in a period or who aren’t paid during a period
• provide their services entirely from their own home or premises not managed by the client – unless they have to because of the services and work they provide to the client
• are actors, singers, musicians, other entertainers, or a fashion, photographic or artist model

Source (Section 1, Guidance: What this means for an intermediary)

I called HMRC to clarify and was told yes they do need to submit, and when I pointed the above HMRC quotation at them they said “well in that case we don’t, but we’d still like it”. I’m sure you would HMRC.

So, which is it? Do they need this data or don’t they?

My agency have relented and after an apparently lengthy conversation with HMRC they agree not to submit any PERSONAL information, but will still submit company name, address, amounts paid, duration of the contract etc.

So HMRC can check how much tax they are likely to receive and the fact that they have virtually all your details can easily flag discrepancies for naïve contractors that aren’t getting their contracts examined and modified, which will lead to more HMRC investigations.

Beware contractors, it’s at your own peril if you don’t ensure your contract is fair and compliant when found to be inside of IR35. I cannot find anywhere that states that the agency NEED to supply this info but they insist.

The fact that their report will seem incomplete to HMRC, means that HMRC will ask them to prove WHY they have only half completed, after which they still will supply my personal data or charge me an undisclosed sum! (I have rejected this clause by the way.)

Can we please have some expert on the opinion as I expect we will see and hear more of this which I suspect won’t change until we have a case to refer to?

So here’s the question:
If a contractor provides their services entirely from their own home or premises not managed by the client – unless they have to because of the services and work they provide to the client, should the agency be including ANY data at all on their quarterly report, and if so exactly what should they be submitting?

A. From 06.04.15, certain agencies are required to send to HMRC an electronic return giving details of the workers they supply to their clients if those workers are not included within Real Time Information (RTI).

The returns are sent by the agency to HMRC each quarter & the results are then used to identify where the agency legislation is not being fully complied with & to identify any resulting tax/NIC at risk.

HMRC’s Employment Status Manual (ESM) 2075 states that broadly speaking, the agency is required to tell HMRC about the people it is not operating PAYE for because the agency is treating those individuals as self-employed contractors or because the agency considers the agency legislation does not apply, as the workers:

• are supplied by another agency
• are supplied by a partnership
• are supplied by an umbrella company
• are supplied by a Personal Service Company
• are supplied by some other legal structure

ESM2110 states that agencies will often contract with a PSC to supply a worker to the client of the agency. The agency will have to make a return to HMRC if it makes a payment to (i) the worker, (ii) the PSC or (iii) any third party, in connection with the services provided by the worker and supplied by the PSC.

Agency legislation – Part 2, Chapter 7 ITEPA 2003

The Agency Legislation, which was amended as from 06.04.14, affects those self-employed workers who do not operate through their own PSC’s, e.g sole traders. As a general rule, the Agency Legislation does not affect PSC’s as they fall within the IR35 regime. Sole traders who are subject to a right of supervision, direction or control by the end user as to the manner of carrying out the work are re-categorised as employees and the agency must operate PAYE & NIC.

S.47(2) ITEPA 2003 exempts certain categories of agency workers including those who provide their services in their own home or at other premises which are neither controlled or managed by the client nor prescribed by the nature of the services. The new reporting requirements do not apply to these categories of workers but as it has been established that the Agency Legislation does not apply to PSC’s then this is not relevant & the agency will still be required to include payments it makes to PSC’s in its quarterly reports.