Using subcontractors or payroll agencies?
HMRC is now focusing on tightening the practices of when companies can use self-employed people and how affects the classification of who is the “agency” in the working relationship/
If HMRC classifies contractors as agencies under the amended legislation, as per its recent guidance notes, then companies will need to understand how to successfully argue either that they are the client in a relationship or that they do not have the right to direct, supervise or control workers they use on projects.
Whether a company is defined as an agency employer or a straightforward employer, proving that a worker is not subjected to a certain level of control – nor even potential control – can be seen as a way to prove the employment relationship does not exist.
RIFT Legal Services believes it should be a priority for all businesses to fully review how they engage their workforces to ensure everything is correct and compliant, rather than to tackle the potentially harder task of establishing self-employed status for the individual.
An important judgement here comes from special commissioner Howard M Nowlan in a 2008 case between HMRC commissioners and Castle Construction (Chesterfield). Mr Nowlan found 314 of 321 construction workers – many of them bricklayers – to be self-employed in this case.
This is critical case law identifying a potential route of defence for construction firms faced with status challenges. But it needs to be carefully prepared and managed by tax law experts, which is where RIFT Legal Services comes in.
If your company uses self-employed workers it’s vital that you know how rules governing this practice have changed, what you should do and when you may be liable. Doing nothing could put your company at risk.
Does your Company use subcontractors?
Engaging individuals on a self-employed basis? You’re exposed to the risk of a legal challenge from HMRC.
HMRC actively challenge companies where it does not believe that workers are genuinely self-employed. HMRC will interview you, the workers and your clients, looking for any inconsistencies and will then quote case law to support their position.
Historically, using an umbrella or intermediary company to engage subcontractors would have given companies protection against HMRC employment status challenges but this no longer provides the bullet proof solution it used to and you could still be exposed.
Unsuccessfully arguing your case at a tax tribunal can result in substantial liabilities; force the closure of the business and, in some cases, HMRC proving negligence that puts liability on to the directors personally.
Agencies paying workers?
“We will stop employment intermediaries exploiting the tax system to reduce their own costs by clamping down on agencies and umbrella companies – while we protect those genuinely self-employed.”
George Osborne, Budget Speech,House of Commons, 2015
Continuing to engage people on a selfemployed basis while hoping for the best or using a payroll intermediary in the assumption that they will offer some kind of protection, are both risky strategies.
To retain individuals on a self-employed basis, agencies must demonstrate that the client has no right to Supervise, Direct or Control (SDC) how the services are provided. If the agency cannot do this, they will be liable regardless of whether another entity pays the individuals.
“In 2015, a large umbrella company under investigation by HMRC had its bank accounts frozen on a Thursday. Since all the clients had paid the umbrella company already, none of the workers got paid on the Friday. As a result, the clients had to find the money to pay the workers TWICE. I founded RIFT to help the construction industry and I’m concerned that if people don’t understand what’s happening they could be unknowingly putting their companies at risk.”
Jan Post, Managing Director
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Produced in partnershi[p with Construction News this white paper provides all the practical advice you need to successfully withstand the scrutiny of an HMRC employment status investigation, avoid unnecessary liability costs and enjoy the sense of security that comes with the knowledge of full compliance.
RIFT Legal Services offer complete employment status expertise, backed up with a highlyexperienced legal defence team and Guarantee to cover liabilities if any are incurred.