Employment intermediaries, Share option gains, Tax free childcare scheme

Last week's Budget contained a few surprises which we will analyse as required in the future. Meanwhile there is a pressing deadline to worry about: 5 August - to submit the first quarterly report under the new employment intermediaries rules. Our newsletter also clarified the confusion created by share options and explained why there is good news for clients who operate childcare voucher schemes.

Employment intermediaries reporting

In our newsletter on 9 April 2015 we warned you about the new requirements to make quarterly reports under ITEPA 2003, s 44 (Agency workers). HMRC has reminded firms that the first quarterly reports are due in by 5 August 2015.  

The examples in the HMRC guidance on this new requirement all relate to employment businesses, but the legislation actually catches far more than just employment agencies. It covers any business that meets all of these conditions:

• has a contract with an end-user client (not just another intermediary in the chain);
• provides more than one worker's services to a client (single worker personal company is not caught);
• provides the worker's services in the UK, or if the services are provided overseas the worker is resident in the UK; and
• makes one or more payments for those services.

In summary these revised agency rules catch any business that supplies workers who will provide personal services to another business, who ought to be treated as employees of that business. However, the distinction needs to be made between the business who is contracting to provide the worker, and the final customer.

For example; a building firm that uses subcontractors to help with a project is unlikely to be within the scope of the agency rules. This is because the building firm is using the subcontractors to supply a service to its own customer, it is not supplying a worker to someone else's business. The customer of the subcontractor is the building firm; the subby is not providing a personal service to the person who commissioned the building project.

Some employment agencies are getting very jumpy about this and are asking contractors to sign declarations saying they work through a personal service company (PSC) and account for all the tax due on their remuneration receivable through that personal service company. They have possibly misunderstood the rules. As long as the worker is a director of his PSC, the worker's remuneration from the PSC will be employment income (dividends are not remuneration).

Our employment taxes experts will be happy to help you determine which of your clients need to make quarterly reports of their workers' details and payments under these new rules.

This is an extract from our tax tips newsletter dated 9 July 2015. The newsletter itself contained links to related source material for this story and the other two topical, timely and commercial tax tips. It's clearly written and extremely good value for accountants in general practice. Try it for free by registering here>>>