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TAXguide 16/17: Employment intermediaries

In TAXguide 16/17, David Heaton provides a comprehensive guide to the major changes to the structure of employment arrangements affecting employment intermediaries that were introduced in 2014 and 2015 changes. He examines their practical impact and incorporates the further changes introduced in 2016 and 2017. Read a summary here, Tax Faculty members can download the full guide.

TAXguide 16/17

Tax Faculty members can download this guidance in full.

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Overview

Major changes to the structure of employment arrangements affecting employment intermediaries were made in 2014, including the introduction of a new reporting obligation on some labour providers, and the operation of PAYE and NIC in more cases of intermediary employment.

These changes were followed in 2015 by extended quarterly reporting rules, and in 2016 by a new restriction on the expense deductions available to umbrella company workers, the effects of which led to growth in the personal service company (PSC) sector. HMRC thinks that more than 90% of PSCs should be self-assessing under the IR35 rules, but are failing to comply.

In an attempt to nullify the perceived loss of tax, further provisions were introduced in April 2017.

This publication replaces TAXguide 03/15 and is based on legislation, HMRC guidance and other available material at 1 August 2017.

Full guide:

The full 43-page guide covers:

  Section Covers
 1 Introduction The legislation
The changes
Terminology - what is an intermediary?
Agency defined - scope of the new rules
Extended definition
Location
Employment intermediary
 2 Background  The market for temporary workers
   Agency or umbrella?
Employment agencies
   Flexibility and cost effectiveness
   Basic principles: employed or self employed
  Tax and NIC deeming rules
   The mischief targeted by the 2014 charges
Countering avoidance via intermediaries
Evasion
 3 2014: The new agency rules Scope
Excluded from scope
Effects
Importance of supervision, director or control
Anti-avoidance and anti-evasion
House is HMRC to police the new rules
 4 2015: New reporting rules Reporting rules with 6 April 2015
Who must report?
Working for whom?
The specific conditions
Key points on the four conditions
The main exception
Making returns
Overseas work and workers
Information required
Reasons for gross payment
Practical examples - employment businesses
Other types of business
Information and record-keeping obligations
Problems with information collection
Penalties
Conclusions on the agency rules
 5 Other intermediary issues IR35 – Chapter 8
Managed Service Companies – Chapter 9 (or not…)
    2017: VAT and the managed non MSC
 6 2016: Umbrella companies and travel expenses
 7 2017: Off-payroll working
in the public sector
Which intermediary engagements are within Chapter 10
If the engagement is in scope
How the Income Tax Acts apply
Information and data protection
Avoiding double taxation and not overlooking GAAP
Knock-on effects
Reaction to the public sector changes
  Appendix 1:
Outside the UK
2014: Offshore employment intermediaries, oil and gas, and seafarers
Abuse by offshore intermediaries
Oil and gas
New secondary NICs liability
Identifying the secondary contributor
Mariners or seafarers