Many individuals currently working through an Agency or Intermediary may not have realised that HMRC’s new False-Self Employment legislation encompasses individuals working through the Construction Industry Scheme (CIS).
HMRC have announced that where workers are provided by a third party intermediary who treats the workers as self-employed then a number of tests will arise to determine whether a liability to PAYE and NIC arises on the self-employed earnings. It is important to note that the operation of tax deductions or gross payments under the CIS scheme provides no protection to the Agency, worker or end user from this new legislation.
To determine whether a liability arises, there are three broad tests which will capture the large majority of workers currently paid through Self-Employed arrangements:
1. Supervision: Supervision is when someone oversees a person doing work, to ensure that person is doing the task they are required to do is being carried out correctly and to the desired standard. This can also involve helping the person where appropriate in order to develop their skills and knowledge.
2. Direction: Direction is someone making a person do his/her work in a certain way by providing them with instructions, guidance or advice as to how the work must be done. Someone providing direction will often coordinate how the work is carried out, as it is being undertaken.
3. Control: Control is someone dictating what work a person does and how they go about doing that work. This also includes someone having the power to move the person from one job to another.
The message from HMRC is clear. The use of False Self-Employment to avoid Class 1 NIC charges through an intermediary is not acceptable and will now have far reaching financial consequences for all those involved. As a result, End Users, Agencies and individuals currently working under these arrangements would be well advised to change their processes immediately.
How we can help.
Tarpon specialises in employing individuals in a tax efficient yet fully compliant manner which is not affected by this latest anti-avoidance legislation. Whether you are an End User, Agency or individual contract we would like to hear from you. Our sensible business solutions will allow you to get on with your work without a hint of False Self-Employment in sight.