Worker Status
10th December 20132013 Autumn Statement: HMRC attack construction worker status, AGAIN!
Construction is a trade which continually has issues with worker status. The building main contractor wants the flexibility of hiring labour only sub-contractors as and when required, but it does not want the rights and costs that come with employment. A present day workaround to this conundrum has been to hire workers through a specialist employment agency, that has bespoke contracts and procedures in place to demonstrate that the workers are self-employed. Unsurprisingly, HMRC lose out in such an arrangement, as self-employed workers pay less income tax and national insurance than employees. In addition, the tax and NIC that is collected is paid over later, is more difficult to administer and is often under declared. So in his 2013 Autumn Statement, the Chancellor George Osbourne announced new tax anti-avoidance measures:
If enacted into legislation in their current form, these will take effect from 6 April 2014.
As the status of false self-employed workers will change to employees the onshore employment intermediaries will have to pay Class 1 employer NICs. This may well be enough of a change to make it no longer cost effective for building contractors to use such agencies. It will be interesting to see how the specialist contract lawyers at these agencies try to exempt themselves from this new legislation.
The Government are predicting that this new measure will affect around 250,000 workers, bringing in £520m extra tax in the first year. So contractors and subbies beware, there’s a change in the wind.
Disclaimer - All information in this post was correct at time of writing.
