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
 
Ruth Pearson
17th October 2019 Is it too early to talk about Christmas!

In December 2018 HMRC wrote to employers to advise of a temporary easement on reporting PAYE information in real time. This was for a number of reasons, one of which could be due to businesses closing over the Christmas period and therefore having to pay staff earlier than normal.   HMRC have received feedback from…

Read More »

Chris Kelly
8th October 2019 Whiting & Partners advises Lettings Agency on finding its new Home

Whiting & Partners, The Corporate Finance Network’s representative firm in Suffolk has advised a well-established lettings agent on its sale to a national group.   The Whiting & Partners Corporate Finance team were approached by their client when they decided to explore opportunities to sell their agency. The team, led by Corporate Finance Partner, Chris…

Read More »

Matilda Mawson
2nd October 2019 Class 2 National Insurance – HMRC’s ongoing issues

July 2015 saw the end of direct debit collection for Class 2 National Insurance. Contributions are now collected through self-assessment and, despite there being 4 years since the change in the way payments are made, HMRC are still having teething problems. The issues arise as HMRC are running two computer systems side by side: national…

Read More »

Ian Piper
1st October 2019 New Off-Payroll Working Tax Rules: Y/N?

Readers, particularly knowledge based contractors working through their own personal service companies, will hopefully now be familiar with the new ‘off-payroll working’ tax rules being introduced in the private sector on 1 April 2020. These are being introduced as part of the Government’s general strategy over recent years to eliminate tax avoidance, tax evasion, and…

Read More »

Richard Alecock
12th September 2019 “Get ready for Brexit” workshops

  The Department for International Trade is hosting “Get ready for Brexit” workshops across the East region, each running from 11:30 – 13:30 followed by a networking lunch.   Please see the link below for dates and venues.   http://x.email.ukti.gov.uk/ats/msg.aspx?sg1=6a523609b267f7129747b384f8f21e3e

Read More »

Steven Denton
10th September 2019 Employer allowance – is it worth the hassle?

The £3000.00 employer allowance ceases at the end of the current tax year. From April 2020 employers will have to re-apply for a di minimis state aid based allowance.   A new HMRC checklist will have to completed to declare the following;   NIC contributions in the previous tax year were beneath £100,000; Confirmation that…

Read More »