False Self Employment in Construction - an update

[MrPAYE]

http://www.hm-treasury.gov.uk/d/consult_construction_responses090310.pdf[/font]

Seems the Government is ploughing ahead with their proposals to bring in deemed employment for construction workers who fail some key tests.

Some tweaking to be done but I wouldn't expect too much.

Grim news indeed for the whole sector but I for one am not surprised.

I'm heavily involved in this so anyone needing an offline chat on this on specifics you know where I am.

 

[Spongebob]

My experience recently of the construction industry (I'm having a extension built at home) suggests that the entire sector runs on cash payments without any paper trail of any kind whatsoever!

 

[MrPAYE]

My experience recently of the construction industry (I'm having a extension built at home) suggests that the entire sector runs on cash payments without any paper trail of any kind whatsoever!

The Government is aware of the 'Black Economy' in the sector, i.e. workers who are not registered with HMRC and who do not show up on anyone's radar.

However, they believe there is bigger fish to fry in terms of getting properly registered subbies onto payroll instead of being paid as self employed, hence their insistence of bringing in new legislation which will effectively do this for thousands of construction workers.

HMRC will be riding on a high just now on employment status given their recent win against Weight Watchers which could rake them in a cool £23m. I think this is a stark warning on here to those businesses that do engage self employed workers that this is high risk stuff and you will need more than an off-the-shelf contract to get by if HMRC do come calling.

 

[*Lexxy*]

thanks for the update.

we deal mainly with the commercial contract side of construction but i was under the impression that these proposals, or similar, had already come in as quite a few companies we deal with HAD to make subbies staff on their books about 2 years ago. perhaps that was more to do with CIS beinging tightened up at that time?

i remember there was plenty of uproar about it from various places & i'm sure a couple of companies even changed their business set up so that they wouldn't have to employ the subbies, they said it would cripple them financially & they just couldn't do it.

 

[MrPAYE]

thanks for the update.

we deal mainly with the commercial contract side of construction but i was under the impression that these proposals, or similar, had already come in as quite a few companies we deal with HAD to make subbies staff on their books about 2 years ago. perhaps that was more to do with CIS beinging tightened up at that time?

i remember there was plenty of uproar about it from various places & i'm sure a couple of companies even changed their business set up so that they wouldn't have to employ the subbies, they said it would cripple them financially & they just couldn't do it.

There has been various initiatives over the years to encourage more construction businesses to put subbies on to payroll, including changes to the CIS scheme, various amnesties, etc.

The current initiative is going to dwarf anything that has gone before in terms of the effect it will have on individual workers, construction businesses and the sector as a whole and it will be mandatory as new legislation is to be introduced.

Under the current proposals probably at least half (but probably much more) of the 300,000 subbies HMRC believes are wrongly paid as self employed will have to be paid under deduction of PAYE and NI. There is going to be some tweaks made to the proposals which came out last July around the 3 key tests (provision of plant/equipment, provision of materials and provision of other workers) but HMRC want their pound of flesh (to the tune of £350m a year in extra tax/NI) so I wouldn't expect major changes.

 

[Mick Johnson]

It's been on the cards for a long time this one. The whole IR35 saga for professional contractors years ago had the same idea, but left enough loopholes to get around it. As usual, I suspect it's the smaller companies who'll be punished most by this, I'm sure the big companies will find a 'just about' legal way around it!!

 

[Mpg]

This is an area that makes me twitch in my business (courier) I use all subbies up and down the country. I have done all the calculators. Asked many questions. If I had to employ the drivers
A: I would lose most of them as they have their own businesses
B: The business probably couldnt afford to Go PAYE
C: HMRC would get even less as it would all be swallowed up in expenses.

 

[MrPAYE]

Believe you me, the big companies will be affected as well. I have had discussions with some of the major housebuilding companies and the general feeling is that this will be huge for everybody in the sector mainly due to a loss of flexibility and an increase in labour rates across the board.

 

[David Griffiths]

The Revenue inspectors go on visits having already made their mind up that the workers are employees - not my words (well, I've said it for a long time actually) but words of tribunal chairmen where the Revenue have taken and lost cases.

The Revenue have challenged thousands of cases about this "false" self employment in different industries. Where the cases have gone to tribunal or court, the Revenue have lost thousands - probably 95%+ - when the ruling is that the self employment is completely genuine and not false at all. On the way of course they will have pressured and bullied many companies into accepting their view.

So having tried for years to persuade the courts that construction subbies are not employees, all they can do is change the rules, which will unfairly catch many self employed workers and claim that all they are doing is correcting "false" self employment.

And although Spongebob gives an example of non compliance in small bulding works, the real money here is on the big civil engineering projects and the big housebuilders.