Contractors' agencies aren't reporting rightly

With an election less than 30 days away, misinformation must be incoming. But misinformation is in the contract market now -- and it could have consequences, writes industry body All Umbrella Companies Are Equal.

Agencies placing brolly contractors: select D, not F

In fact, we can disclose that many IT recruiters have been wrongly advised that contractors via umbrella companies will fall under category ‘F’ in the new reporting requirements for employment intermediaries. That would mean that there would be no need to report gross paid to the brolly. The correct category for such workers is actually ‘D.’

Let’s take a step back, but keep in mind that the issue here is an agency’s obligations when engaging an umbrella company. If an agency doesn’t operate PAYE for a worker they need to give a reason why, selecting an option from a pre-determined list compiled by the taxman:

  • A: Self-employed
  • B: Partnership
  • C: Limited liability partnership
  • D: Limited company including personal service companies
  • E: Non-UK engagement
  • F: Another party operated PAYE on the worker’s payments

From the horse’s mouth

Whichever option is selected then determines how much information must be sent to HM Revenue & Customs. In an attempt to provide clarity where there’s currently confusion, HMRC said yesterday:

“People should choose the entry that they believe most applies to them - if potentially that would be more than one, they should choose the highest.

“Usually, for an agency being supplied employees of a limited company - umbrella company or personal service company, then that will be D. “

What agencies should be reporting

As a result of HMRC’s clarification, the following information is reportable by agencies for each worker:

  • start date of work with client;
  • end date of work with client (if there is such a date);
  • the full name or trading name and address of who the intermediary paid for the worker’s services  (this may be the worker’s company or partnership);
  • Companies House registration number (but only if the worker was engaged to do the work through a limited company -- option D on the HMRC list, above)

What it all means

Contrary to what HMRC guidance initially suggested, where an umbrella has operated PAYE on the payments to the worker for their services, there is no legal obligation to tell the Revenue the amount of the payment. The obligation does however extend to the worker’s identity details, umbrella company name, registered address, registration numbers and the start/end dates of the assignment being undertaken.

Editor’s Note: Related Reading –

Contractors’ Questions: Are reporting rules for agencies retrospective?

Where PSCs are caught by intermediaries’ reporting rules

Contractors’ Questions: Do recruiters require my address and UTR?

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Written by Simon Moore

Simon writes impartial news and engaging features for the contractor industry, covering, IR35, the loan charge and general tax and legislation.
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