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First Case on Intermediaries Returns

By Mark Morton

We have recently seen the first Tribunal case on failure to file intermediaries returns. Interestingly, the taxpayer won the case on an issue which relates to many sorts of penalties, namely that an officer of HMRC should determine the penalty, not a computer.

However, more generally it is worth considering the intermediary rules, as they are very broad.

Agency changes

Changes in FA 2014 were intended to make the agency legislation work in the way it was always intended to by removing the obligation for the worker to provide their services personally. Instead, the agency legislation applies where the worker:

  • personally provides services (which are not excluded services) to another person (‘the client’);
  • there is a contract between:
  • the client, or a person connected with the client; and
  • a person other than the worker, the client or a person connected with the client (‘the agency’);
  • under or in consequence of that contract:
  • the services are provided; or
  • the client or any person connected with the client pays, or otherwise provides consideration, for the services.

This section does not apply if it is shown that the manner in which the worker provides the services, or the worker’s involvement in the provision of the services, is not subject to (or to the right of) supervision, direction or control by any person or remuneration receivable by the worker in consequence of providing the services constitutes employment income.

Where a worker is engaged by/through an intermediary and meets the above conditions they will be deemed to be employed for tax purposes.

This change is supported by a statutory returns requirement and an evidential requirement on the intermediary where they consider the worker not to be under control, direction or supervision to be able to provide evidence of this. There is a requirement to submit a quarterly return containing details of any workers the agency has placed who are not already accounted for through RTI.

It may be worth considering which clients are caught by this extended edition and consequently have enhanced PAYE or reporting requirements.


December 2018 


This article is published with the understanding that SWAT UK Limited is not engaged in rendering legal or professional services. The material contained in this article neither purports, nor is intended to be, advice on any particular matter. This article is an aid and cannot be expected to replace professional judgment. SWAT UK accepts no responsibility or liability to any person in respect of anything done or omitted to be done by any such person in reliance, whether sole or partial, upon the whole or any part of the contents of this article.