On 6th April 2014, HMRC introduced the Employment Intermediaries Reporting requirements. This quarterly report must be completed by recruitment agencies to declare payments made to workers they place with clients, provided these workers are not paid via the agency’s PAYE scheme.
If the agency pays candidates through its own PAYE system, the relevant data—such as tax and National Insurance deductions—is submitted automatically through the agency’s RTI (Real-Time Information) submissions for each payroll run.
However, for agencies placing contract and/or temporary workers who are paid through intermediaries—such as umbrella companies, limited companies, or on a self-employed basis—they are required to declare, on a quarterly basis, the amounts paid to each worker and the intermediary involved. Agencies are not required to report payments to workers who do not pay tax in the UK (e.g., overseas contractors).
The information that must be reported includes the candidate’s full name, address, National Insurance number (or, if unavailable, date of birth and gender), as well as the intermediary’s details and the total amount paid during the reporting period. This data is submitted via the agency’s Government Gateway account, in accordance with HMRC deadlines.
HMRC uses this data to combat the use of “false self-employment” models by supporting compliant intermediaries and penalising those who are non-compliant. It also ensures that the payments made by agencies correspond with those declared by the intermediaries, so that the correct tax and National Insurance contributions are paid.
Recently, there have been instances where HMRC has used submitted intermediary reports to identify agencies making payments to non-compliant umbrella companies. HMRC investigates whether agencies are aware of the non-compliance and whether they intend to continue making payments to these companies.
Failure to submit reports on time, or submitting incomplete or incorrect data, can result in fines ranging from £250 to £1,000 within 12 months. Continued non-compliance may lead to additional penalties of up to £600 for each day the report is overdue.
As many new recruitment agencies are established each year, particularly those placing contract and temporary staff, there is often a lack of awareness around this reporting obligation. Agencies frequently rely on accountants or outsourced back-office providers to help ensure compliance.
Most Pay-and-Bill providers, as well as outsourced recruitment back-office and accountancy services, include intermediary reporting as part of their offering. However, agencies managing their own invoicing and payment processes internally may not be aware of this requirement, especially if their accountant lacks specialist knowledge of the recruitment industry.
There have been instances recently where MAYACHI has spoken with recruitment agencies that have been placing contractors for some time but have not submitted their Intermediary Reporting due to their accountant not informing them or their internal administrative staff being unaware of the requirement.
MAYACHI provides help and support to recruitment agencies to ensure they are kept informed of legislation that may affect their agency, such as the Intermediary Reporting. MAYACHI advises that the agency clients are using recruitment-specific back office and accountancy companies to ensure that they remain compliant with legislation and avoid any fines that may be imposed.
