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28th Mar 2024
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Employment status checker for construction workers

by The Editor at 10:29 07/09/06 (CIS News)
HM Revenue and Customs (HMRC) has a helpline and an interactive online employment status indicator to assist the construction industry in advance of the introduction of the new Construction Industry Scheme (CIS).
The employment status indicator (ESI) can be found at HMRC's website. The helpline - 0845 366 7899 - will help support businesses in the run-up to the new CIS scheme's introduction in April 2007, and is open 7 days a week from 8.00am to 8.00pm (excluding public holidays).

John Healey MP, Financial Secretary to the Treasury, said: "The introduction of the helpline and the on-line employment status tool are important steps in gearing business for the new CIS. They will provide a comprehensive service for businesses needing to find out about the changes to the scheme and to help them determine employment status."

The employment status indicator is an interactive tool which helps determine the status of those engaged by customers to find out whether they are employed or self-employed.

Status indicator
The ESI claims that a worker’s employment status, that is whether they are employed or self-employed, is not a matter of choice, but depends on the terms and conditions of the relevant engagement.

It says that 'recent court cases indicate there is no single satisfactory test governing the question whether a person is an employee or self-employed. One must consider all the factors that are present in, or absent from, a particular case; weigh those pointing to employment against those pointing to self-employment; and then stand back and consider the picture that emerges'.

The indicators lists a number of factors which it admits is not an exhaustive list but does include the more important ones. These include (with extracts from the ESI):

  • Right of substitution/personal services:Where both the worker and his or her engager understand that a suitably qualified or skilled person can (or must) be provided by that worker in his or her absence the situation is very likely to be self-employment.
  • Mutuality of obligation: The minimum obligations that are necessary for a contract of service are the obligation on the part of the worker to give personal service and the obligation on the part of the engager to pay the worker for that service. An employment contract will often also indicate that the engager will provide work for the duration of the contract during the agreed working hours.
  • Right of control: The fact that a worker may be told how to perform duties will usually be seen as a strong pointer to employment but, where the worker is an expert (for example, a ship’s captain, consultant brain surgeon and so on), the absence of this aspect of control would probably not be seen as material....The self-employed person is more likely to have the freedom to do work when and where he or she wants.
  • Provision of own equipment: A self-employed contractor generally provides whatever equipment is needed to do the job (though in many trades, such as carpentry, it is common for employees, as well as self-employed workers, to provide their own hand tools). The provision of significant equipment (and, or materials) which is fundamental to the engagement is of particular importance. For example, where an IT consultant is engaged to undertake a specific piece of work and must work exclusively at home using the worker’s own computer equipment that will be a strong pointer to self-employment. But where a worker is provided with the necessary equipment, materials and so on by the engager that points to employment.

The document concludes by adding that as far as employment rights and benefits entitlement are concerned: t'he fact that a person is found to be an employee for tax and, or NICs purposes does not necessarily lead to the conclusion that he or she is an employee for other purposes'.

CIS scheme
The new construction industry scheme will be introduced from April 2007, twelve months later than originally intended.

The new CIS will result in two main changes. At present, the identification card or certificate held by the subcontractor must be presented to the contractor before a contract is entered into under the provisions of the current scheme. These cards and certificates are being replaced by a new verification service requiring the contractor to establish the tax payment status of the subcontractor before making any payments under the new scheme.

Contractors' existing practise of using vouchers to account for payments and tax deducted under the current scheme will be replaced by monthly returns. The monthly return contains a declaration that the contractor is satisfied that the payments included in the return are not made under a contract of employment.

The new scheme will apply to around 200,000 registered contractors and 900,000 subcontractors.

HMRC had previously launched the status indicator last year but had warned that it was not suitable for 'individuals who provide their services through a limited company (known as IR35). (See: New HMRC status indicator - but not IR35 - Shout99, December 2005).
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Susie Hughes
The Editor © Hardhatter 2006

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