Status Workaround

21st May 2014

Schemes now appearing in Construction Sector to Circumvent HMRC’s new Disguised Employment Anti-Avoidance Rules.
The Government’s new rules to tackle the false self-employment of construction workers and agency ‘temps’ entered into force on 6 April 2014, but were swiftly followed by headlines such as ‘New model tries to duck false self-employment rules’ in the recruitment industry press – suggesting that attempts are already being made to circumvent them.

The new rules essentially deem all construction and agency workers to be employees for tax purposes unless they can actually show they are not under control, direction or supervision and can provide evidence of this. If they cannot do this, their wages will be subject to PAYE tax and NIC. Similar rules existed before 6 April 2014, but some agencies and other intermediaries were using contrived arrangements to sidestep them and pay their workers gross. This was causing employees to underpay both tax and NIC, thereby depriving them of entitlement to benefit, and the Exchequer of revenue. In a system characterised by its piecemeal approach to avoidance behaviour, it seems that, true to form, schemes have been created to exploit both of these weakness in the new rules. Based on limited information gleaned from various providers’ websites, there are two ‘workarounds’ currently in the offing:

  • A construction industry specific scheme focused on questions around the fundamental element of ‘control’ (a concept open to interpretation)
  • For non-construction industry schemes, a ‘hybrid’ scheme where the workers are employees for tax purposes (so PAYE/NIC is deducted in accordance with the new rules) but self-employed for employment law purposes, thereby avoiding auto enrolment, National Minimum Wage and other forms of worker protection..
    As always, only time will tell as to whether these schemes will actually survive a challenge by HMRC.


 
Other items in Blogs
 
Adrian Mackenzie
25th March 2019 When doing nothing is best

From time to time, stock markets go through periods of uncertainty. This could be down to some poor economic news or perhaps due to a political crisis.  The sharp falls that can be experienced at such times are understandably unsettling for investors. They can even tempt some to change their long-term plan by selling their…

Read More »

Thomas Carter
21st March 2019 Preparing for Brexit – Do you trade within the EU?

Your UK business may need an Economic Operator Registration and Identification (EORI) number if we leave the EU with no deal.   What is an EORI number?   An EORI number is a unique identifying number assigned to individual importers and exporters to track trade between the EU and non-EU countries. It’s used during Customs…

Read More »

Lisa Mason
18th March 2019 Payroll update: March 2019

  The team at Whiting’s payroll bureau have produced their latest newsletter, to keep clients updated on relevant recent changes to payroll and related legislation.   Edition 10 – March 2019  

Read More »

Fiona Mann
18th March 2019 High scoring Hannah wins award

Many congratulations to Hannah Shales from our Wisbech office who has achieved a world topping score of 95 in the December 2018 Financial Report exams, set by the Association of Chartered Certified Accountants.   Hannah worked extremely hard with her studies and has been rewarded with an ACCA certificate, cash prize and a bottle of…

Read More »

Lisa Smith
11th March 2019 Revised rates for the Annual Tax on Enveloped Dwellings

The charges made under the Annual Tax on Enveloped Dwellings (ATED) regime increase in line with inflation on 1 April 2019:   Property value From 1 April 2018 From 1 April 2019   £ £ More than £500,000 up to £1 million 3,600 3,650 More than £1 million up to £2 million 7,250 7,400 More…

Read More »

Lisa Smith
11th March 2019 UK residents with UK residential property gains – new obligations from 6 April 2020

From 6 April 2020, UK residents disposing of UK residential property will have new capital gains tax (CGT) reporting and payment obligations. The introduction of a 30-day reporting and payment window, i.e. within 30 days of completion of the sale, marks a significant change to the administration of CGT.   The changes do not apply…

Read More »