The government recently imposed new legislation that requires intermediaries, including employment agencies, to report non-PAYE employees to HMRC on a quarterly basis.
These new regulations have been prompted in response to the huge rise in the number of staff supplied as “non-PAYE” in an effort to avoid the payment of tax and national insurance over recent years.
The increase in those reporting as self-employed, and the public’s vocal opposition to businesses that cheat their way out of paying taxes, has not gone unnoticed by the government. By targeting intermediaries and employment agencies, their message is clear: tax avoidance is unacceptable, regardless of your position or earnings, and the law will be enforced upon those who flout it. Paperwork errors are no longer a viable excuse.
So what should intermediaries do?
The first challenge is to increase public awareness of the new regulations. Many local suppliers remain entirely unaware of HMRC’s latest requirements and may be relying on others to inform them. This is not only an unreliable approach but it’s highly unwise. If you aren’t fully aware of the regulations, how can you know what has to be done?
In this situation a proactive approach is always best. If a company can actively show that they are aware of the new requirements and are determined to ensure their business adheres to them, they will come across far more positively to prospective clients. They will be showing that they have nothing to hide and are a trustworthy business.
Put the effort in
The process of reporting non-PAYE employees itself isn’t a quick or easy process. It can be extremely time consuming, but the consequences of not doing so could be grave. Since the introduction of non-PAYE reporting in April, we have already gathered information on over 3,500 active work placements that have non-PAYE workers on site. The process itself can take hundreds of man hours, but without it we would be opening our business to scrutiny and risk.
Why it matters
Responsibility primarily falls on employment intermediaries to provide sufficient information on the payment status of workers; it is vital that all Managed Service Providers of contingent labour ensure they provide the correct information, at the right time, about the workers they deliver to customers. If the Managed Service Provider fails to provide the correct information, HMRC will treat clients as the employer of the worker for income tax and national insurance purposes. This could cost your company future business and tarnish your reputation.
Following the intermediaries, responsibility lies with local authorities. Not only would this leave them facing a huge amount of work, but more importantly they wouldn’t have the capacity to change the position of the workers - unless of course they could find alternative supply.
This is a significant piece of red tape that businesses need to help local authorities and suppliers overcome. By acting quickly and providing HMRC with accurate information, businesses can prevent any further investigations into the local authorities themselves from occurring – which would mean more bureaucracy, cost and strain on their already stretched resources. It demonstrates the business' ability to be honest and open, supporting the government’s recommendation for transparency, particularly when it comes to tax issues.
Barry Moseley is managing director of Matrix SCM