False self-employment law changes delayed by HMRC

RA Now

HMRC will delay until 2015 the introduction of the enforcement of the changes to onshore intermediaries in relation to false self-employment.

The changes to the law that would result in recruiters being held accountable for UK tax and national insurance of employees of offshore umbrella companies were due to come in this year, and while the implementation of the legislation has not been delayed, the reporting and returns requirements and associated penalties have.

Last week the REC and the PCG, the membership organisation for freelancers, called on the government to delay the implementation of the proposals laid out in the recent Onshore Employment Intermediaries consultation.

The REC said HMRC’s decision has come in direct response to consultation submissions flagging the dangers of rushing full implementation through by 6^th April. These quarterly returns will now come into force in 2015, with the first report due by 5 August 2015, reporting on the first quarter.

“This will allow HMRC to develop and test the new system with a sample of employment businesses/agencies of different sizes to ensure the system works for customers and allow for any IT issues to be resolved prior to going live,” the HMRC wrote in response to the REC’s and PCG’s letter.

HMRC has also introduced a measure to ensure agencies are not held liable when they are provided with fraudulent documents by clients or subcontractors that mislead the reality of control being exercised.

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, the REC said. End-user clients or subcontractors that do wilfully mislead agencies will end up being held liable for tax and NICs themselves, a move that should help cut down on avoidance. The government has reiterated its position that PSCs are out of scope of the new legislation as the profits extracted from PSCs is already taxed appropriately.  

Kevin Green, chief executive of the REC, said that common sense had prevailed. “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,” he added.