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HMRC internal manual

Debt Management and Banking Manual

Debt and return pursuit: miscellaneous charges: employment intermediary penalties

Background

Employment Intermediary (EI) businesses are involved in the worker supply chain. Any business between the worker and the end client is an Intermediary. Traditionally at present the worker works through one EI business (sometimes known as an umbrella company) through a second intermediary (the agency) and for the end client. In this chain it is the EI business known as the umbrella company which employs the worker and is responsible for making sure that tax and National Insurance contributions (NICs) are paid correctly for those workers.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

  • From 6 April 2014, agency regulations meant that agencies had to operate a PAYE scheme for their workers if no one else was.
  • From 6 April 2015, new regulations became effective that required certain EIs to return details of all workers they place with clients where they do not operate PAYE on the workers’ payments. The return is a report (or reports) that must be sent to HM Revenue and Customs (HMRC) at least once every three months. Intermediaries can decide how frequently they upload and send their reports. This could be weekly, monthly, once for each period, or whatever fits in best with how they work providing the report is sent by the end of the quarterly periods report deadline date.
Reporting period Deadline date
6 April to 5 July 5 August
6 July to 5 October 5 November
6 October to 5 January 5 February
6 January to 5 April 5 May

There may be several intermediaries in the chain, but it is the intermediary closest to the end client that is known as a ‘specified intermediary’ and has to upload the reports.

(This content has been withheld because of exemptions in the Freedom of Information Act 2000)

If the customer needs more information refer them to Employment intermediaries: reporting requirements (GOV.UK).

Penalties

The legislation caps the total penalty that can be charged per report at £3,000; this includes all penalties that may be charged on the report apart from daily penalties. The late-filing penalties are automatically issued, the errors and intervention penalties are manually issued.

The penalties are issued through ETMP. They will be visible as soon as the letters are issued.

No interest will be charged on these penalties.

There are three types of penalties:

  • filing a report late
  • failure to file a report
  • failure to provide a correct/complete report.

Filing a report late

If EIs do not upload a report on time (see the table of deadline dates above) they will receive a late-filing penalty. If there is nothing to declare in any quarter, they are obligated to file a ‘nil’ report. If they are no longer a specified intermediary with a reporting requirement then the system also allows them to deregister by showing they are ‘No Longer an Intermediary’. If we receive four quarterly nil reports in a row, the EI will be ceased by HMRC.

The amount charged for automatic penalties for failure to report/late filing depends upon how many quarterly returns are not filed or late in a 12-month period. The penalty amounts are:

  • £250 - first default
  • £500 - second default
  • £1,000 - third and later defaults.

The automatic penalty amount will be reset to £250 if at least 12 months has passed since the last failure to report / late filed report.

The penalty notice will also advise that they may be subject to further penalties if they do not submit a report for the period.

Daily penalties commence in 30 days if the report is not received. The daily penalties are capped at £600 but in practice are chargeable at £10 a day. The businesses that have not uploaded a report after their initial £250 penalty will receive a £300 penalty after 30 days and a further £300 penalty after 60 days. The daily penalties for that particular return will stop after 60 days.

Initial default for late filing will increase as set out above, but daily penalties will remain at £10 regardless of which return is late.

Failure to file a report

It will generally be through intervention action with employment intermediaries where it is discovered that they were a ‘specified intermediary’ with an obligation to make reports, but they have failed to do so at all.

Penalties for this failure are double the amount of the late filing penalty and are set at:

  • £500 – initial penalty for the failure
  • £1,000 – second failure within the year
  • £2,000 – third failure within the year.

Daily penalties are capped at £600 but in practice are chargeable at £10 a day. The businesses that have not uploaded a report after their initial £250 penalty will receive a £300 penalty after 30 days and a further £300 penalty after 60 days. The daily penalties for that particular return will stop after 60 days.

Initial default for late filing will increase as set out above, but daily penalties will remain at £10 regardless of which return is late.

Failure to provide a correct / complete report

All businesses that file these reports can file with incomplete data if some information is not known; for example if they have an employee that has only just come into the country and is awaiting a National Insurance Number (NINO). We advise businesses to upload the report with as much information that they have and they then have a period of three months to correct any errors. As they complete the report the software notifies them immediately if there are any errors and advises where they are; for example, there is an incorrect Company Registration Number (CRN) or NINO.

There will also be instances where the business has missed off workers completely – deliberately or otherwise. The business can upload its report in the same way and also has three months to correct the detail. A failure of this nature is more likely to be determined by intervention.

If they do not correct the incomplete data/errors within three months, they will be charged a penalty. These penalty amounts start at the maximum level of £3,000 but can be abated for such things as disclosure, cooperation and so on. Before issuing a penalty the EICU will have been in touch with the EI and they will know what is wrong with the return.

Appeals

There is a 30-day appeal period. Penalty queries and appeals will be dealt with by the EICU; their phone number and address are on the penalty notice. Appeals will be dealt with manually and on receipt they will be scanned in and the penalty stood over. Once the appeal has been looked at, EICU will either cancel the penalty or advise the EI the penalty is due and cancel the standover.

IDMS

Items will appear on IDMS as follows.

Penalty description Charge type description
Failure to report / late filing EI Late Report Penalty
Failure to report / late filing EI Late Report Daily Penalty
Failure to provide a correct report EI Incorrect Report Penalty
Failure to provide a complete report EI Incomplete Report Penalty
Failure to provide a complete report EI Incomplete Report Dly Pen