Contractors' Questions: Will HMRC's reporting requirements apply?

Contractor’s Question: Regarding the reporting requirements for employment intermediaries, what is the position of a company that engages a number of limited company contractors directly to avoid paying agency margins? Will they need to report to HM Revenue & Customs by August 5th?

Expert’s Answer: Pending clarification from HMRC which we have sought about your question but not yet received, we can refer you only to the department’s official guidance.

It states, at chapter 2, that: “One-person limited companies, or personal service companies, that only supply a client with 1 worker don’t have to send reports to HMRC.

“If the worker is supplied through an intermediary they will be included in the return of the intermediary that has the contract with the end client.

“If a personal service company supplies more than 1 worker, including any subcontracted workers, it will be acting as an intermediary and will have to send reports for each reporting period.”

The expert was ‘Roger the retired taxman,’ an adviser to industry body All Umbrella Companies Are Equal.

Expert’s Answer: It depends on what the “company that engages a number of limited company contractors” is doing.  If, as I suspect, it is the company that the contractors are actually working for (i.e. a substantive company with a real business other than just the supply of labour), then it has no reporting requirements – it is the ‘end-client’ in this position. In that case the limited company contractors will need to report if – and only if – they supply more than one person.

If on the other hand this company has been put in the same place in the chain as an agency would be – perhaps as a matter of convenience so that the end client only has one payee to deal with – then it will be intermediary 1 and will have to make the reports. The limited company contractors then do not have to report.

The expert was David Kirk, director of chartered accountants David Kirk & Co.

Editor's Note:  Related Reading - 

Contractors' Questions: Do recruiters require my home address and UTR?

Contractors' agencies aren't reporting rightly

Contractors' Questions: Are reporting rules for agencies retrospective?

Tuesday 21st July 2015