During 2014 new legislation covering any company that sits between a worker and an agency or end user was introduced. The measures entitled 'Onshore Employment Intermediaries: False Self-Employment' were announced via the Autumn Statement on 5 December 2013, to be launched 6 April 2014.
One of the main issues that OEI set out to combat was to prevent the use of employment intermediaries to avoid National Insurance contributions and income tax by presenting employment relationship falsely as self-employment.
The measures introduce a new tier of legislation which comes into play only when an intermediary service is used to contract and pay workers. If no intermediary is used to sever the contractual relationship between the worker and end user, existing employment tests and CIS status/compliance checks still apply.
An intermediary is legally required to demonstrate that none of your operatives who are paid outside PAYE have been subject to supervision, direction or control. In short, compliance with the new reporting requirements is onerous. The first return (covering 6 April to 5 July) had to be submitted to HMRC no later than 5 August 2015.
OEI definitely has teeth, so to avoid falling foul of HMRC many intermediaries have erred on the side of caution and/or took the easy option, by deducting Tax and National Insurance regardless of the nature of the work being undertaken. Result? Operatives receive an instant pay cut, resulting in an unhappy workforce, which is not what a business needs.
If you use an intermediary have they told you clearly and unambiguously how it is coping with OEI? Whilst the buck should stop with the intermediary, if they no longer exist or it is proved that you knowingly entered into a ‘Sham Contract’ then you could also become liable.
We understand the importance of recognising this legislation, accurately engaging individuals based on their workplace circumstances and ensuring those who are genuinely self-employed remain self-employed – and are not forced into false employment.