Currently agencies are required, on a quarterly basis, to provide details to HM Revenue & Customs about themselves and any workers they have been involved in the supply of to end-clients, where the workers have been treated as self- employed for income tax and NI purposes and paid outside of PAYE.

According to HMRC’s revised reporting requirements, agencies (as ‘intermediaries’) will, in the same quarterly record on workers they provide to the end-user, also report the details of those who operate via an external PAYE umbrella company. The net payments to workers won’t have to be disclosed to HMRC by the agency (as that information is provided by the umbrella company via their RTI submissions) but the agency will have to report the amount paid gross to the umbrella company, including expenses and VAT. This means that HMRC will have access to both gross and net payments which will enable them to determine whether or not PAYE has been correctly applied; it will also provide a comprehensive record of which recruitment agencies are working with which umbrella companies.

HMRC has published its draft Finance Bill legislation on the proposal for payments of annuities to beneficiaries to be made tax-free on the death of an individual under 75, subject to certain conditions.  The draft clauses change the current provisions regarding who can receive payments from an annuity on the death of a member.  The changes permit anyone, including non-dependents, to receive these payments.  The facility for a beneficiary to take a tax-free annuity following the death of the member is going to be especially useful where the member had not taken out an annuity himself before death.

The government proposals contained in a government consultation document, The Taxation of Controlling Persons, requiring private sector employers to put senior level contractors who engage their personal service companies on their payroll has been much criticised. There are particular difficulties where an Agency is involved in the middle of a contractor and end user where there will inevitably be arguments over who is responsible for defining whether the contractor is a controlling person or not. No doubt the devil will be in the detail of the final legislation.

RTI is a new system being introduced by HMRC to improve the operation of PAYE. Information will be collected more frequently and efficiently. Submissions by employers must be made at or before the time they pay their employees and is a major change from current practice. It is important both the employer and their payroll deliverers are prepared for the changes which start from April 2013.