Sub-contractors and PAYE

[N1ck]

Have any of you seen the article in the latest Forestry Journal about HMRC clamping down on workers who are paid as self employed sub-contractors but who should actually be paid as employees through PAYE even if they are only casual labourers?

 

Starting in Scotland but then rolling out across the country HMRC are looking closely at situations where workers are engaged on a labour only basis where workers are set up as self-employed. In most cases these workers supply an invoice and are then paid without any tax deducted, but if these "contractors" are told where, how and what to do - they can't decide - these are indicators of employment not sub-contracting and should have tax and National Insurance deducted.

 

There is even talk of a similar scheme to the CIS system where tax is deducted at source.

 

I have always taken it that if someone works for me they are self-employed sub-contractor and if they supply me with an invoice, I pay them without making any deductions and it is then their responsibility to sort out their own tax.

 

This has got me worried if I have to bear the extra burden and expense of operating a PAYE system. Would this give casual workers the right to holiday and sick pay?

 

There is a guidance document from HMRC but I haven't ploughed my way through it yet.

 

http://www.hmrc.gov.uk/leaflets/labour-providers-due-diligence.pdf

 

Any thoughts?

[slack ma girdle]

Read the first paragraph

 

'This guidance applies if you use labour supplied

by a third party, supply or make arrangements

to supply labour'.

Does this apply to you ?

[essentialARB]

There will be a follow up article, hopefully in the next issue of Forestry Journal (Jan 2013) to this first article, following a second meeting, held with contractors rather than woodland managers.

 

Figures quoted by HMRC are that in their initial investigations (mainly with establishment and maintenance contractors), they have spoken with 11 contractors engaging 175 workers. The potential 'income' for these workers was identified as approx £820,000 - of which only £200,000 odd had been declared (by any means - self assessment or self employment) to HMRC. This figure was declared by, I think, 31 workers - meaning that over £500,000 is unaccounted for. Of the 144 not declaring an income - 60% were claiming unemployment benefit.

 

Based on these figures it is perhaps easy to see why HMRC have embarked on their investigation.

 

HMRC have confirmed to us that they will be looking at all areas of the forest industry, not just establishment - so harvesting contractors will be included too.

 

The main crux of their argument is that self employment is not a matter of choice. Your employment status is determined by the terms of your engagement - not by you.

 

The CIS (Construction Industry Scheme) was put forward as a possible solution - but is not likely. This is something that the industry would have had to lobby for... as HMRC pointed out - why would they implement such a scheme when clearly PAYE should be operating in some instances? I am also not sure that numbers in the industry would warrant such a scheme.

[renewablejohn]

Dont get me started on HMRC. If it was up to me I would sack the lot of them.

[Robert_S]

" Starting in Scotland...." its like the poll tax all over again..

 

The way i read that is if you are using an agency ( third party) to source your labour force not directly employing a labourer to take brash to the chipper.