In this blog, Paul Gibbons, Implementation and Technical Development Manager at Bond Payroll Services, looks at how a change in legislation is set to catch out ill prepared recruitment companies, with reporting and fines imminently approaching the industry.
Unemployment is at an all-time low. Research has shown that unemployment has fallen to 5.6%, its lowest since 2008. With more jobs being available, recruitment agencies are in demand, filling vacancies and processing more and more requests for permanent and temporary employees, as well as acting as intermediaries to get businesses skilled staff at short notice for events and temporary engagements.
However, it has become apparent in recent years that some employment intermediaries have been avoiding employment taxes as well as their obligations to comply with statutory employment rights. They are helping to create false self-employment, and/ or supplying workers from an offshore location. These methods are being used to reduce employment taxes for the individual, and therefore they avoid having to comply legally with UK tax requirements.
In a bid to combat these issues, HMRC has introduced new regulations for PAYE – The Income Tax (Pay As You Earn) (Amendment No.2) Regulations 2015. This regulation gives HMRC information that will reduce false self-employment as well as abuse when it comes to offshore working.
What does this mean for recruiters?
The regulation will provide support for employment intermediaries that comply, penalise those that don’t, ensure that the right tax and National Insurance is paid by people working through employment intermediaries and reduce any unfair commercial advantage.
In order to do this, HMRC will be asking intermediaries to provide details of the workers that they supply and payments made to those workers, where they don’t operate under PAYE, every three months using an online service.
Do Recruiters need to change their payroll processing?
This change in legislation will create an additional administrative burden for both small and large recruitment agencies and intermediaries.
Paul Gibbons, Implementation and Technical Development Manager at Bond Payroll Services, commented “For those using in-house payroll software and systems changes will be needed in the collection of detail about the worker, their engagement, and payments made in respect of that worker. This will need to be provided to the HMRC on a quarterly basis. For those companies using an external provider they will need to check that they are fully aware of the changes, and ready to submit the detail to the HMRC on behalf of the recruiter.
The first quarter for submissions started on 6 April 2015, with intermediaries having until the 5th day of the following month, after the end of the quarter, to file the first return.
