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UK – Onshore intermediaries reporting requirements and associated penalties delayed until 2015

14 March 2014

Following a government consultation on the use of employment intermediaries facilitating false self-employment in order to enable employment tax avoidance, Her Majesty’s Revenue and Customs (HMRC) announced yesterday that they will delay the reporting requirements and and associated penalties until 2015. However, enforcement of the legislation will start from 6 April 2014.

In the Autumn 2013 Statement, the government stated that it would consult on strengthening existing legislation with effect from 6 April 2014 to ensure the correct amount of tax and national insurance contributions (NICs) are paid where the worker is employed.

The government advised that it received more than 100 responses from a wide spectrum of stakeholders; some of whom voiced concerns. Almost half of the stakeholders raised concerns both over the shorter consultation period and that the legislation was being introduced too quickly.

A number of respondents stated that the new reporting requirements create uncertainty and would have considerable costs for the parties involved.

In order to address some of these concerns the government advised that it will delay the first return until the first financial quarter of 2015/16 to allow HMRC to develop and test the new system with stakeholders.

Other stakeholders were concerned about the definitions included in the draft legislation, namely the specificity of ‘intermediary’ and suggested instances where arrangements would be inadvertently caught.

The Government therefore intends to amend clause S44 (1)(a) of the proposed draft legislation to prevent these arrangements being caught but ensure that the legislation still has a wider remit than currently exists to capture those currently stepping outside the legislation.

Following the consultation, a measure to ensure agencies are not held liable when they are provided with fraudulent documents by clients or subcontractors that mislead as to the reality of control being exercised has also been introduced. While this stops short of a full “reasonable due diligence” clause, it is another win for compliant agencies that seek to engage with the spirit of this new legislation. End user clients or subcontractors that wilfully mislead agencies will end up being held liable for tax and NICs themselves, a move that should help cut down on avoidance.

REC chief executive Kevin Green says: “We’re really pleased HMRC has listened to us and the industry, and has agreed not to take enforcement action or impose reporting requirements until the middle of 2015. Common sense has prevailed.”

Corrections have been made to this story.


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iBalance Ltd

Jeremy Manson 14/03/2014 9:36 am

"...Her Majesty’s Revenue and Customs (HMRC) announced yesterday that they will delay the introduction of enforcement until 2015..."

Per para 3.74 the legislation will come into force 6 April 2014 and so strictly speaking enforcement has not been delayed. However HMRC will not require the formal reporting requirements to be implemented until 2015.

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