Onshore Intermediaries Act: 2 years on…
8 December 2016
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8 December 2016
Is that the Light at the End of the Tunnel? Or an Oncoming Train!
Nick Pilgrim of EEBS, the leading Construction Industry payroll specialists, analyses the impact of the Onshore Intermediaries Legislation
When introduced in 2014 the new regulations for workers being supplied through intermediaries caused relative panic with in the construction sector. In an industry predicated around sub-contracting functions to specialist suppliers the compliance issues raised were daunting. As a result many contractors began insisting that all Agency and Sub-contractor supplied tradesmen, up and down the supply chain, must be either PAYE or have their own Personal Service limited companies.
Two years down the line many of those original anxieties appear to have abated and many supply arrangements, after minimal contractual adjustments, have reverted to their original models.
Is this wise? Were the original concerns unfounded? Or is there something nasty lurking just around the corner!
So what was all the fuss about?
In essence, and paraphrased, all individuals supplied through an intermediary must be paid through PAYE, unless they are not subject to any supervision, direction or control in how their services are provided.
And why the panic?
Again in precis, for two main reasons:
1. In order to catch all the Terms use in the act (individual, intermediary, supervision etc.) were all, deliberately, very loosely defined, and
2. This legislation has a pretty nasty sting in the tail. A transfer of debt provision whereby anyone linked to the arrangement could potentially be held liable for PAYE deemed due but not paid, whether deducted or not. This includes directors of agencies and contracting companies!
The problem with all widely worded legislation is that many unintended targets are caught in the net. With regards to Onshore Intermediaries this has been exasperated by the lack of clear guidance; as is often the case the advice on the HMRC website is more a wish list than an accurate reflection of either the original legislation or case law.
The fear of personal liability has meant that the directors of a significant number of agencies and suppliers have simply passed the issue along the line. Often by means of unexplained additions to terms of business, or buried within contractual arrangements, clients sign perfunctory declarations that exempt the agency or supplier from potential liability. In doing so they are accepting responsibility themselves for any future debt transfer issues!
So what should you do?
Check the health of your supply chain! If you engage tradesmen through intermediaries, or indeed if you engage them directly, you should talk to a specialist CIS Payroll provider. They are able to keep abreast of the ever-changing legislative landscape and should provide you with clear, unbiased advice. (And you should perhaps consider choosing one who has never had their model challenged by HMRC, who are audited by the Aspire Partnership, (the UK’s leading Construction Tax Specialists) and whose compliance is backed by a comprehensive guarantee!)