From the 6th of April, 2015 UK Recruitment Agencies dealing with temporary labour will have to start submitting quarterly reports to HMRC containing company, personal and pay details relating to any worker who is either:
Agencies will get thirty days from the end of the reporting period to send the information, meaning the first report, covering the period from 6th of April to the 5th of July, will need to be submitted by the 4th of August, 2015.
With the final spec for reporting having just been released by HMRC (on Wednesday the 3rd of February) they’ve listened to the consultation responses and pared down the amount of data needed for certain types of engagement from the original proposal last year.
The actual information agencies now need to submit is:
There’s no doubt that this reporting requirement is going to present challenges to the whole temporary labour supply chain, not least of all the Recruitment Agencies who will be responsible (and liable) for the timely submission of accurate information to HMRC each quarter, as well as collating and providing evidence as to why the worker was not treated as an employee, or if PAYE has been operated by another party down the chain.
Here are some considerations:
Agency PAYE – Do not need to be included on the report
Workers on an Agencies own PAYE are excluded from the new reporting requirement, so will not need to be reported for additionally. Because PAYE is being operated by the agency, HMRC are getting all the data they need from the real time information (RTI) reports already submitted each time a worker gets paid.
Umbrella Employees – need to be reported
While most Umbrella Companies operate PAYE already agencies will still have to report, essentially duplicate information, for all umbrella employees. This means that Recruiters working with Umbrella Employers will be reliant on the supply of information from the Umbrella’s payroll and compliance systems. The good news is that, because of the employment relationship, all compliant Umbrella Companies should already have all of the required information.
Umbrella Companies will, however, need to work with their payroll software provider, who in turn should already be talking to HMRC’s digital team to get the right information out, in the right order and format. This is going to be absolutely crucial for Agencies who work with several different umbrella suppliers who may use several different payroll software providers.
From a data protection perspective the Umbrella will need to have permission from their employees to share their personal and sensitive information with the agency to avoid any potential issues.
Personal Service Companies (PSC’s) – need to be reported
It’s one thing if all the information is readily available, but what happens if it’s not? This has got to be one of the biggest challenges for agencies dealing with PSC’s, or single person private limited companies that aren’t used to disclosing this level and detail of information. There are Recruitment Agencies who work with a handful of PSC’s and the very biggest who may work with several thousand.
So, that’s potentially thousands of individual submissions that the agency will need to get on with collating and submitting, alongside all the other information from their Umbrella’s.
What happens if the PSC refuses to, or is unable to provide the information to the agency? If the PSC uses a specialist contractor accountancy provider then the odds are they will be more likely to be able to provide the information when requested, in the format needed.
The Self-employed – need to be reported
Those agencies who are working with genuinely self-employed workers, whether in construction (CIS) or otherwise, will need to be able to prove that those workers aren’t, and cannot be, supervised, directed or controlled by anyone as to how they do their work. Whilst contractually this may seem straightforward it could prove tricky to evidence the ‘absence’ of something in practice. Any best practice would have to involve a joined up approach between the end-client, the agency, any intermediary and the sole trader (or partner). Also agencies will need to thoroughly review the paperwork, including insurances and liabilities, to make sure there’s no contractual ‘right’ of control by the client or other third party.
What are Liquid Friday Doing?
We are in the process of consulting with and informing our clients how the changes will affect them and making sure we have really good processes in place to mitigate risk though the supply chain.
As members of the eminent industry association, the Freelancer and Contractor Services Association (FCSA), we are pushing for relaxed/basic reporting for PSC’s. This is a B2B transaction between the agency and the PSC, and the existing legislation already ensures the legitimacy of this relationship. In our view, reporting should be scrapped for Umbrella Companies as PAYE is already being reported via HMRC’s real time information platform, so why does this need to be duplicated.
Liquid Friday are working closely with our payroll software providers to ensure we provide our agencies with information in a secure and timely way. Once we have finalised our solution we will let you all know.
Transparency, and stamping out bad practice
One thing is for sure, this reporting will give HMRC complete transparency of the different arrangements in operation in the sector, compliant and otherwise, allowing them to legislate against avoidance models and contrived schemes set up to disguise employment or exploit lower paid workers, which as an industry we certainly welcome.
What to do Next?
Existing customers please call your Liquid Friday Account Manager for more details.
If you’ve not worked with us but want to discuss your Onshore Intermediaries strategy, identify and control your risk or find out how Liquid Friday blow the competition out of the water, call the team now on 0800 3166030.