HMRC reporting requirements for recruitment agencies
In an effort to crack down on tax avoidance and discourage behaviour such as disguised employment, HMRC have introduced new reporting requirements which oblige recruiters to record and report details of contractors or temporary workers, including those not paid directly via the agency’s own PAYE scheme. The requirements came into force on 1 April 2015; however, the first quarterly report for 6 April to 5 July was due on 5 August 2015.
What are the specific requirements?
The collated information on workers, which includes name, address, date of birth, gender and national insurance number, must be reported online on a quarterly basis. In addition, agencies must advise HMRC as to why PAYE was not operated, e.g. another party operated PAYE on the worker’s payment.
Recruitment agencies will also be required to retain information, together with documentary evidence showing why PAYE was not operated, to verify that information sent to HMRC was correct. This information needs to be kept for a minimum of three years following the tax year to which it relates. Penalties may be issued for late, incomplete or incorrect compliance.
Why is it important and does it affect agencies?
Much of the information will already be retained by agencies, but it will no doubt be an administrative burden. Smaller agencies in particular may struggle if many of their contractors are not directly employed (e.g. they are umbrella and/or limited company contractors) and they are required to collect information from various sources. In addition, it is important that agencies ensure that contracts permit them to obtain the information from these sources. Where contractors are reluctant to provide information, agencies will need to decide whether to continue dealing with them and risk breaching the rules, or perhaps making it a condition of dealing with them dependant on receiving any information required.
For more information, contact Gurpreet Sanghera.