By Daniel Hunter

The Independent Professionals and the Self Employed (IPSE) has issued a warning to Government that new reporting requirements will be burdensome for businesses and will distort the contractor market place.

IT follows the onshore intermediaries’ legislation introduced last year.

New regulations will require intermediaries — typically agencies — to report the personal details of all ‘workers’ they supply to clients where employment taxes are not deducted at source. Despite strong protests from IPSE, the regulations will also apply to independent professionals who operate through their own limited company.

The regulations have been tempered by HMRC in the wake of fierce criticism by IPSE, but the changes do not go far enough, according to Andy Chamberlain, Senior Public Affairs Manager at IPSE.

He said: “The original proposals required intermediaries to report on individuals for three years, even if the engagement only lasted a few weeks. This was ludicrously excessive, as we pointed out to HMRC, and we are pleased this has been dropped to one year.

“We are also pleased to see that some personal details such as title, hours worked and passport number are no longer required. These are important concessions but they do not address the inherent impropriety of the regulations, particularly with regard to the way they impact limited company contractors.”

IPSE believes where the ‘worker’ operates through a limited company, the reporting should be restricted to company information only. This would reflect the business to business nature of the contract with the agency and it would be in keeping with HMRC guidance on how the legislation interacts with these professionals.

Instead the regulations will force agencies to ask limited companies to supply personal details of their director(s) which includes their national insurance number. IPSE believes it is entirely inappropriate for one business to ask another for the personal details of its employees and then report those details to HMRC.

Chamberlain says the new regulations will also prevent professionals from subcontracting: “Perhaps the most worrying aspect of this legislation is the impact it will have on those independent professionals who subcontract out work to others. The rules could lumber the original contractor with the reporting burden. Subcontracting out work can be beneficial to all businesses in the chain yet these regulations will strongly discourage it, leading to a distortion in the marketplace.”

Chamberlain believes HMRC has not properly considered the consequences of the legislation: “We have clearly told HMRC, both in our written responses to the various consultations and in face to face meetings, that these rules will be damaging for limited company contractors and the agencies that place them. We have asked them why limited companies cannot be carved out from the reporting requirements, particularly as including them protects absolutely no revenue.

“We haven’t been satisfied with the answers they have given which is why we are now seeking a legal view. IPSE has engaged solicitors to examine the possibility of challenging the legislation. They are seeking answers from HMRC on IPSE’s behalf.”

Unless the draft legislation is further amended, the new reporting regulations will come into effect from April this year.

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