UK: Employment Intermediaries – Reporting Requirement

Last Updated: 28 May 2015

New legislation was introduced from 6 April 2014 to clamp down on 'false self-employment' through employment intermediaries such as recruitment agencies.  

The new rules essentially operate by requiring PAYE and class 1 national insurance deductions to be made by the employment intermediary where the worker is subject to (or to a right of) supervision, direction or control by the end client or someone else. 

From 6 April 2015 employment intermediaries such as recruitment agencies will also be required to file a return each quarter with details of workers they pay outside PAYE to ensure compliance with the new rules.  Below we look at the detailed reporting requirements and highlight where the rules may catch out intermediaries other than a traditional recruitment agency.

What to report

Initially, HMRC provided a long list of onerous information to be included on the quarterly report (including the workers title, hours worked, passport number).  Following concerns being raised that too much information was being requested, resulting in an unnecessary administration burden, the list was shortened.  It still remains, however, a lengthy list!

The latest information required to report is as follows;

  • Full name and address of employment intermediary
  • Details of the worker being paid gross including:
    - Full name and address
    - National Insurance number (or if they don't have one date of birth and gender)
    - Unique taxpayer reference – where self employed or a member of a partnership
    - Start date (and end date if applicable) of work with the client
  • Reason why PAYE is not operated selected from options provided (e.g. self employed, another party has operated PAYE etc.) and records should be kept to document and support this reason.
  • Where PAYE is not operated by another party the following details must also be included:
    - Amount paid to the worker, currency and whether inclusive of VAT
    - Full name and address of the third party paying the intermediary for the workers services
    - Companies House registration number of the third party paying the intermediary, if it is a

The report will need to be filed via an online HMRC service.  Once made, the intermediary must continue to make quarterly reports until it either; files effectively nil returns for 3 consecutive tax years (i.e. it does not have any workers that PAYE is not operated for) or it notifies HMRC that it is no longer an employment intermediary.

Deadlines and penalties

A report must be made within 30 days of the end of the reporting period.  For example, the deadline for the first reporting period which runs from 6 April 2015 to 5 July 2015 is 5 August 2015.

If a report is filed late an automatic penalty of £250 will apply.  A second offence within the same 12 month period will be subject to a £500 penalty and £1,000 will be levied on third and later offences within 12 months.   

Penalties may also be applied where the report is incorrect or incomplete.

Not just recruitment agencies...

The rules are drafted widely and do not only apply to traditional recruitment agencies.  In fact any worker whose services are provided to a client via a third party would potentially be within the rules.

We have recently had a case of a corporate partner engaging with self employed consultants whose services were then provided directly to the partnership.  This provided HMRC with two prongs of attack, firstly they looked to argue that the agency legislation applied but reserved the right to consider whether the individuals should be treated as employees if unsuccessful in their first argument. 

Clearly, providing the individuals are 'true' consultants the end position will be the same and they can continue to provide their services without being subject to PAYE.  However, if the individual had been engaged directly with the partnership, the discussions with HMRC may have been less prolonged and they would also not need to file quarterly reports going forward.


If you provide workers through an employment agency or other intermediary without deducting PAYE or NI you may be subject to a reporting requirement from 6 April 2015. 

Get in touch with our tax team if you would like further advice on how and when the agency rules apply, the new reporting requirement and / or the employment status of consultants provided.

Originally published on 13 March 2015

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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