New legislation against 'false self employment' in construction
The Government has concluded that the best way to address this issue for income tax and NICs purposes is to introduce legislation which deems workers within the construction industry to be in receipt of employment income unless one of three test apply. It describes this criteria as simple, clear and easy.
One or more of the following tests must apply for the worker to be deemed self-employed:
- 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;
- Provision of all materials – that a person provides all materials required to complete a job; or
- Provision of other workers – that a person provides other workers to carry out operations under the contract and is responsible for paying them.
If the worker is deemed to be in receipt of employment income, Pay as You Earn (PAYE) and NICs will be due on the payment he receives.
The consultation paper says: "However, it is intended that the introduction of the test should not have an adverse impact on those genuinely carrying on a business and the test has been formulated to achieve this. The Government recognises that a flexible labour supply is important to the industry and that the self-employed workers who are carrying on a business make an important contribution to this."
The Government has attempted to address this issue several times in the past with online Employment Status Indicators, a 1997 tax and NIC moratorium, increased compliance activity, targetted letter campaigns to engagers; and, most recetly, a new Construction Industry Sceme (CIS).
If a worker is providing their services through their own company which they control, sometimes termed a personal service company, the deeming provision for construction will take precedence over IR35. This means that the worker’s personal service company must first consider the deeming legislation and, only if this does not apply, go on to consider the intermediaries legislation in respect of any payments.
The consultation closes on October 12, 2009.
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The Editor © Hardhatter 2009