What is the Onshore Intermediaries Act 2014? How does it effect me?
If you currently pay tradesmen through any form of intermediary (agency, payroll provider or labour only supply sub-contractor) then you need to be aware of the Onshore Intermediaries Act that was introduced in Finance Bill of 2014.
What is it?
This new legislation requires that all payments made to any individuals who are subject to supervision direction or control (SDC) through any intermediary, irrespective of the length or complexity of the supply chain, must be subjected to PAYE.
What is an intermediary?
An intermediary is not defined by the legislation and, whilst primarily designed to catch agencies, payroll providers and labour only sub-contractors, there is nothing to say that it could not apply to anyone within the supply chain of a major contract.
Why was it introduced?
As part of HMRC’s ongoing policy to challenge (what they describe as) “false self-employment” and to increase the tax take by forcing self-employed people to be paid through PAYE.
Why should I be concerned?
The Act comes with a particularly nasty sting in its tail called a transfer of debt provision. This gives HMRC the ability to transfer the “debt” of any unpaid tax or NI to anyone in the supply chain (including the company directors personally!) if they consider their organisation to have made a fraudulent or reckless declaration regarding the degree of SDC that applies to the arrangements.
But surely every subcontract engagement contain some degree of SDC?
Absolutely! And that is the problem; it is a subjective test which pivots on the manner in which the services are provided. The only way to avoid liability is to be able to show that you have considered each arrangement individually and have come to a reasonable conclusion.
But surely, if I use an agency, it’s their problem?
No! Most agency terms and conditions (often signed without detailed consideration) includes declarations that there is no SDC applied to the individuals supplied by the agency. This potentially transfers the problem straight back to you!
So what to do?
Engage a supplier who provides a detailed, in depth assessment of the arrangements that you have in place for each individual tradesman, and who provides bespoke solutions to your specific needs. Preferably one who can demonstrate they developed their systems and contracts in conjunction with the country’s leading experts in dealing with HMRC compliance.