I had a call from Jovan Pavlicevic, Commercial Director of Forest Group (a chartered accounting firm and regulated firm of financial advisers) earlier this week. He was telling me that HMRC are set to announce a new piece of legislation on offshore intermediaries. The proposed changes will impact umbrella providers, as well as UK recruiters and their end clients. I’m no expert on this stuff but it sounded very newsworthy so here is an overview that Jovan has produced for us:
The offshore employers act is an upcoming piece of legislation, likely to come in to force in April 2014. With this piece of legislation, HMRC will ensure that employer’s NI is paid in full, for all workers in the UK. Agencies and umbrellas have been able to make a saving on this tax, by utilising international or offshore structures.
Transfer of debt
The proposed legislation is broad, meaning companies won’t be able to frustrate the new rules. NIC’s (and specifically the employer’s portion) will be due in full from April 2014. If the offshore intermediary doesn’t pay, then HMRC will transfer the debt onshore to the ‘relevant party’ (the UK recruiter). If the recruiter fails to pay, the debt will be passed up the chain to the end user of the labour (the recruiter’s clients). UK recruiters need to understand how their candidates are supplied, and to revisit their charging models.
New reporting requirement
As well as the transfer of debt provisions, HMRC are introducing an onerous reporting requirement. Any UK recruiter using an offshore or international umbrella will need to report to HMRC quarterly, outlining the following:
The name of the candidate
The NI number of the candidate
The length of the assignment
The details of the offshore intermediary making the payment
The legislation is still in draft format, with consultation open until the 8th of August, 2013. The new rules, if enacted, will come into force in April 2014. Although the legislation is still a draft, HMRC have made a commitment that the rules will not be applied retrospectively. This means there’s no need for recruiters to panic yet, but it’s time to review your supply chain and business model.
