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
 
Amanda Newman
23rd August 2019 Changes in VAT for Contractors and Subcontractors

Confused by the new CIS reverse charge VAT rules that come into effect from 1 October 2019, then HMRC have issued further guidance at https://www.gov.uk/guidance/vat-domestic-reverse-charge-for-building-and-construction-services#overview.   The basics are as from 1 October 2019 if you are a VAT registered subcontractor working for a contractor you will no longer be paid for the VAT element…

Read More »

Ian Piper
23rd August 2019 31-Oct Brexit: How can SME’s prepare for no-deal?

As we edge ever closer to what looks more and more likely to be a ‘no-deal’ Brexit, SME business owners should now be readying their businesses.   There is clearly no certainty over quite how affected we shall all be by Brexit. However, there are sensible risk management mitigation steps that business owners may wish…

Read More »

Jaimie King
13th August 2019 Charity accounts assurance

Whether unincorporated, a charitable company or a CIO (charitable incorporated organisation), charities are required to have certain levels of assurance over their financial statements depending on their size. The limits are much smaller than companies, meaning that many charities require some sort of external scrutiny. The requirements by size are as follows: Income up to…

Read More »

Nick Edgley
24th July 2019 From April 2020 – 30-day Reporting and payment date on residential property disposals

From 6 April 2020 the Government is making some significant changes to the rules regarding the reporting and payment of Capital Gains Tax (CGT) when individuals, trustees and personal representatives dispose of residential property and it is important to be aware of these.   Currently such a disposal would be reportable on your tax return…

Read More »

Jodie Tarbin
23rd July 2019 Residential Property Tax News!

  Lettings Relief and Principal Private Residence Relief   Following my previous blog regarding the changes announced to the Principal Private Residence Relief (PPR) and lettings relief rules, the consultation period ended on 1 June 2019. You can view the consultation responses here.   HMRC have now published a policy paper on 11 July 2019,…

Read More »

Fiona Mann
22nd July 2019 Exam Success – World Beating Results!

  We’ve had some extraordinary exam results over the last few days – staff at Whiting & Partners have excelled themselves. Luke Bacon from St Ives office has achieved an outstanding result of 99% for the Financial Accounting and Reporting exam – coming joint first in the world.  This result has been recognised by the…

Read More »