Employment Intermediaries: HMRC Reporting Requirements A Futurelink Group Guide

Introduction to Futurelink Group

Futurelink Group have expertise in contractor payroll solutions, 2016 will be our 20th anniversary. Over this time we have developed our portfolio of payroll and accountancy solutions, covering all industry sectors, from first time contracting right through to career-contracting. Our portfolio includes: Umbrella PAYE, Limited Company, PSC, Sole Trader, CIS (Construction Industry Scheme) and CIS Umbrella solutions, as well as in-house tax return and tax advisory services. Features: •

All solutions are compliant

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We guarantee a smooth transition from your existing payroll provider and are able to effect a seamless transfer fo your contractors

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Bespoke payroll system which enables high volume timesheet processing

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All relevant Right to Work checks carried out - for example: ID and DBS

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Workers paid by Same-Day Faster Payment

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Free SMS text notifications to workers

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No Cost to you, the client

Contents

1. Why was the Legislation Introduced? Background What the regulations will do

2. What this means for an Intermediary

Who uploads and sends the report? Example 1 Example 2 Personal Service Companies How to send reports to HMRC Deadlines and penalties Information that should be included in the report Payment and working details Record keeping

3. How can Futurelink Group help?

Umbrella PAYE workers CIS (Construction Industry Scheme) and Sole Trader workers Limited Company and PSC (Personal Service Company)

01923 521 900 futurelinkgroup.co.uk [email protected]

Why was the legislation introduced? Background

What the regulations will do

Working trends have changed in recent years and many people use an employment intermediary to help them find work.

The regulations will give HMRC information that will enable them to decrease false self-employment and abuse of offshore working. This will help HMRC to:

There are different types of intermediaries; the most common are employment agencies. These provide people with regular work and give them the flexibility to accept or decline work as they wish. Businesses increasingly use intermediaries to get skilled staff at short notice for temporary engagements, so employment intermediaries play an important role in contributing to the UK economy. In recent years HM Revenue and Customs (HMRC) has seen increasing evidence of growth by some intermediaries: • •

helping to create false selfemployment supplying UK workers from an offshore location

Both of these methods have been used to reduce employment taxes and avoid having to fulfil their legal employment rights and obligations.

• • •

•

support intermediaries that comply penalise intermediaries that don’t comply make sure the right tax and National Insurance is paid by people working through intermediaries reduce unfair commercial advantage

HMRC will do this by making certain intermediaries provide details of the workers they supply, and the payments they have made to those workers, where they didn’t operate Pay As You Earn. The intermediary will have to upload and send HMRC a report that contains the information once every 3 months using an online service.

What this means for an intermediary From 6 April 2015, intermediaries must return details of all workers they place with clients where they don’t operate Pay As You Earn (PAYE) on the workers’ payments. The return will be a report (or reports) that must be sent to HMRC once every 3 months. If you only introduce workers to clients or supply workers to other intermediaries, and you aren’t involved in any arrangements that follow, you don’t need to send HMRC reports.

Who uploads and sends the report? You will need to send a report to HMRC if at any time in a reporting period you: • • •

•

•

are an agency have a contract with a client provide more than one worker’s services to a client because of your contract with that client provide the worker’s services in the UK - or if the services are provided overseas, that the person is resident in the UK make one or more payments for the services (including payments to third parties)

You will need to provide the worker’s details and payment details for workers where you don’t operate PAYE. This includes overseas workers and payments where the worker is working in the UK or working temporarily abroad. You don’t have to include any details of workers who are your own employees. You don’t have to include any payment details where the payments have already been included as part of a PAYE Real Time Information (RTI) submission by any other organisation. In both examples, Intermediary 1 must provide HMRC details of all worker and their payments where they didn’t operate PAYE. They must also include a reason why they didn’t operate PAYE

If the workers you supply provide their services at sea in the oil and gas industry wholly on the UK continental shelf, you don’t need to send HMRC reports.

01923 521 900 futurelinkgroup.co.uk [email protected]

Example 1 Intermediary 1 has a contract to supply a client with workers. Intermediary 1 contracts Intermediary 2 to supply workers. Intermediary 1 is unaware that Intermediary 2 separately subcontracts to Intermediary 3, who separately subcontracts to Intermediary 4.

Contract to supply  workers

Intermediary 2

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

Intermediary 1

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Client

Contract to supply  workers

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Contract to supply workers Contract to supply  workers

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Intermediary 4

Intermediary 3

A diagram that shows the contracts between a client and Intermediary 1, Intermediary 1 and Intermediary 2, and then the sub-contracts between Intermediary 2 and Intermediary 3, and Intermediary 3 and Intermediary 4. Intermediary 1 will need to get all the information they need to include in their report to HMRC from Intermediary 2, including any workers they were supplied by Intermediary 3 and 4

Example 2 Intermediary 1 has a contract to supply a client with workers. Intermediary 1 has separate individual contracts with Intermediary 2, 3 and 4 to supply workers.

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Intermediary 2

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Contract to supply workers Contract to supply  workers

Intermediary 3

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

Intermediary 1

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Client

Contract to supply  workers

Contract to supply workers

 Intermediary 4 Diagram that shows the contracts between a client and Intermediary 1, Intermediary 1 and 3 other intermediaries. Intermediary 1 will need to get all the information they need to include in their report to HMRC from intermediaries 2, 3 and 4.

01923 521 900 futurelinkgroup.co.uk [email protected]

Personal Service Companies

How to send reports to HMRC

One-person limited companies, or personal service companies (PSCs), that only supply a client with 1 worker don’t have to send reports to HMRC.

Following the end of the first reporting period from 6 April to 5 July 2015 you will have until 5 August 2015 to send your first report to HMRC.

If the worker is supplied through an intermediary they will be included in the return of the intermediary that has the contract with the end client.

You must use HMRC’s report template to create the reports. HMRC will provide an online service for you to upload and send your report.

If a PSC supplies more than 1 worker, including any subcontracted workers, it will be acting as an intermediary and will have to send reports for each reporting period.

The service will use your PAYE reference and Accounts Office reference from when you sign in to the service as part of the report. When you use the service, you’ll have to state that the information in the report is correct before you can send it to HMRC.

Deadlines You must send us your report, or reports, by each reporting period’s deadline or you may receive a penalty. You can replace a report after you have sent it. You must do this before the next reporting period’s deadline.

Reporting Period

Deadline Date

Date for Replacing a Report

6 April to 5 July

5 August

5 November

6 July to 5 October

5 November

5 February

6 October to 5 January

5 February

5 May

6 January to 5 April

5 May

5 August

01923 521 900 futurelinkgroup.co.uk [email protected]

Penalties If your report is late, incomplete or incorrect you may be charged a penalty. New automatic penalties have been introduced for not sending a report or for sending a late report. These are given based on the number of offences in a 12-month period. These are: • • •

£250 - first offence £500 - second offence £1,000 - third and later offences

If there are 12 months or more between offences, you will only be charged £250 for the first offence in the new 12-month period. Where there is continued failure to send reports or send reports late you may receive a penalty every day that you don’t send a report. There will be a new appeal process for these new penalties. For incomplete and incorrect reports, manual penalties may apply on a caseby-case basis. If you replace a report before the deadline of the next reporting period without being asked to, HMRC will consider this when they decide if you have to pay a penalty.

Information that should be included in the report If you are responsible for sending the report to HMRC, you should include: • • •

your full name, address and postcode the worker’s personal details the engagement and payment details

If you want to send reports that contain formatting errors and missing data you will be able to. You may receive a penalty if your reports are incomplete or incorrect. HMRC has provided a technical specification for software developers and intermediaries to allow them to develop software for their clients or themselves.

Worker details These are the personal details of the workers, including partners within a partnership and limited company directors, who personally provided their services to the client. These details must be included no matter how many intermediaries are involved in supplying the worker to the client. The intermediary sending the report must get these details from the worker or from any other intermediary that supplied the worker. You should include each worker’s: • • •

full name, address and postcode National Insurance number - if they have one and you don’t know their date of birth and gender date of birth and gender - if they don’t have a National Insurance number

01923 521 900 futurelinkgroup.co.uk [email protected]

Payment and working details

The start date is the first date that a worker provides their personal services to a client for which they are paid.

You must select the reason why you didn’t operate PAYE on the workers payments from these options:

The end date is the last date that a worker provides their services to a client for which they are paid.

A: Self-employed B: Partnership C: Limited liability partnership D: Limited company including personal service companies E: Non-UK engagement F: Another party operated PAYE on the worker’s payments If more than one reason applies select the option that comes first on the list. For example, if A and E both apply, select A. You should also include the: •

worker’s unique taxpayer reference - if they are self-employed or a member of a partnership

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start date of work with client

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end date of work with client - if there is one

Where the worker’s services are provided on different occasions to a single client in a reporting period the payments should be combined into a single figure. Where the worker’s services are provided on different occasions to more than one client, a separate line and payment should be provided for each separate client. If a bureau is used to pay another party on the worker’s behalf the name of the company or partnership should be reported, not the bureau.

If the worker was engaged to do the work and their payments have not been reported to HMRC using RTI, any worker engaged through options A to E, you must also include: •

•

total amount paid for the worker’s services - this is the total payment that you contracted for the worker’s services including any expenses and VAT currency - this must be given in Great British pounds (GBP) or Euros (EUR) and if the worker was paid in another currency it should be converted into Great British pounds or Euros using HMRC exchange rates

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whether or not VAT has been charged on the payment

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the full name or trading name and address of who the intermediary paid for the worker’s services - this may be the worker’s company or partnership

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Companies House registration number - only if the worker was engaged to do the work through a limited company (option D)

You may not know how much money the worker actually gets, but you will know how much money you paid to whoever supplied the worker to you. This may be another intermediary, limited company or PSC, or the worker themselves. For example, you have a contract with a client to supply 10 workers for £1,000. You supply: •

5 workers yourself who you pay £100 each - 2 are your own employees you pay using PAYE and you report their payments on your RTI submission

•

5 workers from another intermediary who you pay £450 (£90 for each worker) and PAYE is operated by someone else

Your report to HMRC will include: •

3 workers you supplied who weren’t your employees who were paid £100 each

•

5 workers from the other intermediary who were paid £90 each

01923 521 900 futurelinkgroup.co.uk [email protected]

Record keeping You must keep information, records and documents that prove what you sent to HMRC was correct. HMRC may ask you for this information. This information should include any documents that show why you didn’t operate PAYE on the worker’s payments. You should work with the workers, other intermediaries involved in supplying the workers, and the clients to get suitable evidence. HMRC must be satisfied that you didn’t have to operate PAYE on their payments. You must keep the records in the form that suits you best for at least 3 years after the end of the tax year that they relate to.

How can Futurelink Group help? For the workers that we payroll via your agency, Futurelink Group can assist with the burden of collecting this data for your workers and completing these reports before submission to HMRC. On receipt of the signed Data Sharing Agreement, we will provide you with the data in HMRC’s templated format every pay period (weekly/monthly) starting from week commencing 6th April 2015. The data we will provide for each worker is as follows:

For all PAYE umbrella workers We will confirm in your report that another party has operated PAYE (Option F) and further information as follows: • • • • • • • •

Full name National Insurance Number (NINO) Date of birth (only if NINO not provided) Gender (only if NINO not provided) Full address Engagement details (Option F) Start date (will be 6th April for all existing workers) End date (only provided if the worker is no longer engaged)

For all PSC, Limited Company, CIS and Sole Trader workers We will confirm that the worker is selfemployed (option A) or operating as a Limited Company/PSC (Option D) and further information as follows: • • • • • • • • • • • • •

Full name National Insurance Number (NINO) Date of birth (only if NINO not provided) Gender (only if NINO not provided) Full address Engagement details (Option A) UTR (unique tax reference) Start date (will be 6th April for all existing workers) End date (only provided if the worker is no longer engaged) Amount paid for the workers’ services Currency VAT status Name & address of party paid by intermediary (our details)

01923 521 900 futurelinkgroup.co.uk [email protected]

Data Sharing Protocol (DSP) for the Sharing of Personal Data Between: Futurelink Group, of Kings House, Home Park Business Estate, Station Road, Kings Langley, Hertfordshire, WD4 8LZ (the ‘Supplier’)

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O s

And

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[Agency/Company], of [Address] (the ‘Intermediary’) [Date]

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Introduction and background The Intermediary has requested personal data relating to the individuals (hereafter referred to as the ‘Worker’) that the Supplier is providing Umbrella/Sole Trader/CIS/PSC [delete as applicable] payroll services to.

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The Intermediary requires the given data in order to meet HMRC’s record keeping and reporting requirements in relation to the Income Tax (Pay As You Earn) (Amendment No. X) Regulations 2015.

a x E

The Supplier will provide the Intermediary with the information outline in this agreement but has no liability for any erroneous reports that the Intermediary submits to HMRC and is not liable for any fines the Intermediary may incur for late or incorrect reports.

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Nature of the personal data being shared and process for sharing

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Nature The Supplier agrees to provide the Intermediary with the minimum information required to meet their HMRC legislative requirements. The Supplier will provide data for each Worker of the Intermediary whom the Supplier is providing services in HMRC’s report template only.

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Process The data will be provided electronically by Supplier within 7 working days after the relevant pay period has ended.

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The Intermediary agrees to use the data only for its intended purpose, have sufficient security measures in place to prevent any breach of personal data and will not distribute the data to any third parties or external bodies other than HMRC.

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The Supplier will inform the Worker that data outlined above will be shared and for what purposes.

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The Intermediary will also inform the Worker that is it sharing data with the Supplier and for what purposes the Intermediary will be using the data.

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The Intermediary agrees to delete/destroy in line with Government/Local Authority Guidelines all provided data when the Worker has ceased providing services through them for a period of 1 year (the point at which the reporting requirement ends).

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Legal basis The Supplier will provide the Intermediary with the data under the following conditions as outlined in the Data Protection Act 1998 Schedule 2, Section 4(3): ‘The processing is necessary—

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a) for the performance of a contract to which the data subject is a party, or b) The processing is necessary for compliance with any legal obligation to which the data controller is subject, other than an obligation imposed by contract. c) The processing is necessary for the purposes of legitimate interests pursued by the data controller or by the third party or parties to whom the data are disclosed, except where the processing is unwarranted in any particular case by reason of prejudice to the rights and freedoms or legitimate interests of the data subject.’

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Data Protection Principles The Supplier and the Intermediary agree that they have complied with the eight Data Protection Principles as set out below and will continue to do so in all their processing of the data being shared: Schedule 1 to the Data Protection Act 1998 (the Act):

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1. Personal data shall be processed fairly and lawfully and, in particular, shall not be processed unless a) at least one of the conditions in Schedule 2 is met, and b) in the case of sensitive personal data, at least one of the conditions in Schedule 3 is also met.

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2. Personal data shall be obtained only for one or more specified and lawful purposes, and shall not be further processed in any manner incompatible with that purpose or those purposes.

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3. Personal data shall be adequate, relevant and not excessive in relation to the purpose or purposes for which they are processed.

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4. Personal data shall be accurate and, where necessary, kept up to date. 5. Personal data processed for any purpose or purposes shall not be kept for longer than is necessary for that purpose or those purposes.

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6. Personal data shall be processed in accordance with the rights of data subjects under this Act.

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7. Appropriate technical and organisational measures shall be taken against unauthorised or unlawful processing of personal data and against accidental loss or destruction of, or damage to, personal data.

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8. Personal data shall not be transferred to a country or territory outside the European Economic Area unless that country or territory ensures an adequate level of protection for the rights and freedoms of data subjects in relation to the processing of personal data.]

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Title:

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Signed by the Supplier Name:

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Signed by the Intermediary

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Title:

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Signature:

Signature:

……………………………………………………

……………………………………………………

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Date:

Date:

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Name: