Late returns incur immediate fine
Employment intermediaries have, since April 2015, had to file returns detailing those whom the intermediary believes it has a legitimate reason for engaging workers on a self-employed basis.
Returns are filed electronically each quarter as follows:
| Reporting period | Deadline date |
|---|---|
| 6th April – 5th July | 5th August |
| 6th July – 5th October | 5th November |
| 6th October – 5th January | 5th February |
| 6th January – 5th April | 5th May |
Penalties
Where a report is late then a penalty is charged. The amount of the penalty is based on the number of offences in a 12-month period:
- £250 – first offence
- £500 – second offence
- £1,000 – third and later offences
Continued failure to send reports, or where reports are frequently sent in late, can result in daily penalties of up to £600 being imposed for every day they are late.
Where a report is submitted late but at least 12 months have passed since the last time it was late, then it will be treated as a first offence.
Up until now, HMRC have applied a ‘light touch’ in imposing penalties, accepting that employment businesses have been on a learning curve since the introduction of the new reporting regime. However, that grace period is now over and the Revenue will issue automatic penalty notices for returns submitted late from 6th August. Notices will be sent out 30 days after the deadline date.
Reports that are incorrect, e.g where information is missing, may also incur a penalty but this will be determined on a case-by-case basis. An incorrect report that is voluntarily amended before the deadline of the next reporting period is not guaranteed to escape a penalty as this will be left to HMRC’s discretion.
Should HMRC discover that someone should have submitted a report but they failed to do so, then they will receive a penalty.
Whilst HMRC have said that they want the penalty regime to follow that of Self Assessment, i.e. behavioural based, they will not suspend fines as the department considers that, in the last year, employment businesses have had enough time to get used to the reporting process.
The good news is that there is a right of appeal against a penalty and HMRC can be asked to review their decision.
How does this affect contractors?
Contractors will have already experienced being asked for their details by agencies for inclusion on their reports and although the vast majority of reports will be filed by employment businesses freelancers should be aware that they too can be required to submit reports if they supply more than one worker. So where a contractor engages a substitute or other sub-contract workers on a non-PAYE basis, then they will have to file a report.
All reports must be filed online using HMRC’s template.
If a PSC uses a substitute as a ‘one-off’, then not only will they be required to file a report for the period the engagement took place but for four quarters thereafter. Subsequent reports will be ‘nil’ returns but it is only after four nil returns in a row that will remove the necessity to lodge future reports.
HMRC are currently running a campaign to help employment intermediaries and have recently amended their guidance but this is only for the purposes of reminding those affected that penalties are now automatic. The guidance is however due another overhaul once the Revenue have published its qualitative research that it commissioned earlier this year.
“HMRC are currently running a campaign to help…”
The thought of HMRC “helping” anybody is beyond laughable.
Red tape, red tape, and more red tape. And still people wonder why the economy is struggling. Let IT experts focus on IT, let builders focus on building: remove these ridiculous and opressive burdens.
I have noticed lots of agencies – of all sizes, from one-man bands to the megaliths with multiple brands – asking for lots of personal details, using this legislation as their excuse. I have yet to see even one satisfactorily explain their security and confidentiality measures for handling, transmitting and storing that information.
My guess is that the agencies don’t care about the risk of identity theft (why would they, they can hide behind HMRC). And HMRC cares even less about the human risk, only about grabbing a pound of flesh.
It’s no wonder this country is in a mess. There is no pride in doing things right, only in making sure they can’t be blamed when things go wrong (as they inevitably will, with a huge negative impact on the little man trapped at the bottom of this festering mess they have carelessly created).
could not agree more with andrew, we need to remove the shackles of stupidity. We are not under taxed as a nation, we overspend. If we stopped overspending, all of this offensive hmrc rubbish would not be required. Once again, this scum outfit pulls the wool over our p poor politicians and grabs powers on the basis of amazon and starbucks. And use these illegal arms to shoot the little guys. Our career politicians are too obsessed with political correctness to see it and are, as such, not fit to run anything.
I think there is more to it.
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:
[quote]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
•[b]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[/b]
•are actors, singers, musicians, other entertainers, or a fashion, photographic or artist model
[/quote]
Source (Section 1, https://www.gov.uk/government/publications/employment-intermediaries-reporting-requirements/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 length 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?