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Onshore reporting: HMRC reveals stance on umbrella contractors

However, the tax authority says it will only require agencies to provide “identity details” for umbrella contractors. Payment details won’t need to be supplied.

Record-keeping and reporting requirements linked to the onshore employment intermediaries legislation come into force in April.

Staffing firms will need to submit quarterly reports to HMRC. These returns must include detailed personal information on every contractor or temp who has been placed by the agency during the previous quarter, but is not paid via its own PAYE scheme.

Parasol, one of the UK’s largest professional umbrella employers for contractors, sought clarification from HMRC following the publication of a consultation response on Tuesday.

The document confirmed the extent of the information that intermediaries will need to include in returns.

In response to representations made during the consultation, HMRC has “removed the need” to report worker title, hours worked, passport number, National Identity Card Number and – where a National Insurance number is provided – the need to report date of birth and gender.

However, Parasol managing director Derek Kelly claimed the document left several key questions unanswered for recruiters.

He said, “We didn’t feel that the document provided sufficient clarity and certainty as to whether staffing firms will need to include contractors in quarterly returns to HMRC.

“The crucial paragraph regarding contractors employed via umbrellas (point 2.17) was open to interpretation, and failed to make clear whether or not these individuals are covered by the reporting requirements placed on agencies.

“That’s why we asked HMRC for further information.”

A spokesman for HMRC told Parasol, “Regarding paragraph 2.17, yes recruitment firms will need to report on workers employed via umbrella companies. However under the new specification where PAYE has been operated by an Umbrella in the UK, we will require the worker's identity details but not payment details.”

The spokesman added, “The accompanying technical specification will be published fully on the website early next week after we talk to software developers on Friday. The draft guidance is due to be published on 9th February.”

Derek added, “HMRC has sought to provide some clarity for limited company contractors such as those served by our sister company, ClearSky Contractor Accounting.

“However, it is still unclear whether agencies will need to report on personal service companies (PSCs). We hope the draft guidance and legislation will address this uncertainty.”

Parasol and ClearSky Contractor Accounting are part of the Optionis Group. 

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