HMRC Targets False Self-Employment in Construction

HMRC have issued for consultation a proposal to bring into the PAYE net another 300,000 who are currently taxed as self employed.  The very term, “False self-employment” used by HMRC, is a good indicator as to their attitude towards this group of workers.

It is clear that they are frustrated by the lack of success that they have achieved so far in pursuing “false self-employment”.  Despite their best and aggressive efforts they have frequently been thwarted by what they describe as “A slight change in presentation of the facts can have a significant impact on the decision reached”.

In particular they indicate their displeasure at  specialist advisory firms who provide contracts which contain all that is needed to be classed as self-employed and the structures of Umbrella companies and the like.

HMRC’s proposal is to change the rules of the game and in future all those working in the construction industry will be DEEMED to be employees and subject to PAYE and NI regardless of contracts or complicated structures.

The proposal sets out three criteria which if a worker meets one or more of them they will not be caught by the deemed employment provisions.

The criteria are:
1.Provision of plant and equipment – that a person provides the plant and equipment required for the job they have been engaged to carry out.  This will exclude the tools of the trade which it is normal and traditional in the industry for individuals to provide for themselves to do their job;
2.Provision of all materials – that a person provides all materials required to complete a job; or
3.Provision of other workers – that a person provides other workers to carry out operations under the contract and is responsible for paying them.

By way of example it looks as if a bricklayer would have to provide a mixer and possibly scaffolding to come within 1, or all the bricks, sand and cement for 2 to apply, or supply a gang of workers and pay them subject to PAYE for 3 to apply.

HMRC are sympathetic soles and state that the “Government recognises that getting the timing right for the implementation of the proposed solution is critical and will take into consideration representations made on this point”  A cynic might conclude that the Government’s need for cash will out weigh any pleas to delay implementation.

The other worrying statement is that “The Government is keen to ensure that the proposed legislation operates as intended and, in particular that the deeming criteria are simple and easy to apply”.  Statistically this could be a possibility because in the words of the investment heath warning “Past performance is not a reliable guide to the future”