April 15th 2015
How many UK businesses would think they were affected by new rules for ‘offshore employment intermediaries’? Or, for that matter, ‘onshore’ employment intermediaries? After the dust has settled on the Government consultation, new rules are here for ‘employment intermediaries’, and you may unwittingly, be one.
Owner-managed businesses which are run as limited companies or as partnerships can be affected. This is because the rules now treat anyone who is a link in the chain between an ‘end user client’ and a worker as an ‘intermediary’. If your business structure involves an ‘employment intermediary’, there are two sets of rules to watch out for:
Agency rules which could make you an employee of your own business, or challenge your remuneration split
Reporting rules which would require you to make quarterly reports to HMRC of people who work for you and who are not treated as employees
As we have come to expect, there are penalties for failure to make returns, or to apply PAYE as required.
The reporting rules apply from 6 April 2015. The rules are complex, so it is worth taking advice if you think the rules could apply to you. The reporting rules require you to make returns to HMRC if you are an ‘employment intermediary’ as described above and you supply more than one worker to an end client. How this works is best seen by looking at two examples:
How you could be taxed as an employee
William Wallace is a partner in a restaurant business, ‘Haggis and Neeps’. However, he also worked for two weeks in another restaurant business, ‘The Bruce and Spider’, to provide holiday cover. If William is under ‘supervision, direction or control’ when he provides holiday cover at ‘The Bruce and Spider’, he is caught by the revised Agency rules, and is taxed as an employee.
His own partnership, ‘Haggis and Neeps’, would become his employer for the holiday cover work and it would be liable to deduct PAYE from his earnings from ‘The Bruce and Spider’. Such income would then become William’s personal income for tax purposes, and not that of the Haggis and Neeps’ partnership.
On the other hand, if William provides holiday cover as head chef, he might not be subject to ‘supervision, direction or control’. In this case, earnings from ‘The Bruce and Spider’ would be partnership income of ‘Haggis and Neeps’.
The dividing line can be very fine, and the consequences of getting it wrong could be substantial.
When you might need to make returns
Malcolm trades via his own limited company, Malcolm IV Ltd. He supplies his services to Daylight Holdings plc. He is not subject to ‘supervision, direction or control’.
In May 2015, David joins the team at Malcolm IV Ltd, and assists on the contract with Daylight Holdings plc. As Malcolm IV Ltd now supplies two workers, it needs to consider the new reporting requirements.
If you work through your own partnership, such as a farming partnership carrying out contract work for other farms, the reporting rules could also apply.
There are exceptions to these rules, but these are narrowly drawn. As the PAYE deductions and reporting requirements apply now, this cannot wait until your usual year end accounts.
As so much depends on the detail of the arrangement, we would recommend that anyone concerned about these issues gets in touch.
Please contact DSC Chartered Accountants on Harrogate 560547.
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