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Employment Intermediaries and Reporting Requirements

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Recent legislative changes announced in the Finance Act 2014 seek to provide Her Majesty’s Revenue & Customs (HMRC) with visibility of the relationship/s that exist within recruitment and employment supply chains where an intermediary (an intermediary being defined as an agency, Limited Company or Umbrella Company) is present.

Specifically through the Onshore Employment Intermediaries and Offshore Employment Intermediaries legislation, (collectively referred to as “Employment Intermediaries” legislation) there are new reporting requirements in place from April 2015 to allow HMRC to have visibility of payments made to individuals providing services to an end client.

What is the Employment Intermediaries Legislation?

The legislation is, in the main, designed to target perceived tax avoidance through the use of certain vehicles (such as Sole Traders, Partnerships and/ or offshore companies) specifically with the intention to class workers as “self-employed” for tax and NIC purposes. 

The Government believe that in some instances such arrangements are being falsely described as “self-employment” in order to avoid the associated tax and NIC costs that would be attributable in an employment scenario.

Whilst the definition of “false self-employment” is relatively broad, in general it captures arrangements where an individual is treated as self-employed but where it is evident that based on the nature of the working practices that a genuine employment relationship would exist were it not for the presence of an intermediary. 

What does this mean for contractors?

For more information about the new legislation and how it may affect contractors and recruitment agencies please download our guide.

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