False Self-Employment in the Construction Industry

July 30th 2009

You may be interested to know that HMRC and the Treasury have issued a consultation paper aimed at tackling what it perceives as false self-employment in the construction industry.  Whilst it is intended to deal with construction businesses specifically at this stage, it is perhaps an indication of HMRC’s intention to stamp out the practice of individuals being treated as self-employed in all sectors when the terms they work under are, in its view, tantamount to employment.

In a nutshell, the proposal is that businesses whose ‘main business’ is carrying out or commissioning construction operations will have to operate PAYE and Class 1 NIC (employees’ and employer’s) in respect of construction workers unless one or more of three statutory criteria are met. These are as follows:

- the worker supplies plant and machinery (this does NOT include tools of the trade); or

- the worker supplies all the materials to do the work; or

- the worker engages other workers in undertaking the work and is responsible for paying them.

The proposal is that this will be enshrined in legislation rather than relying on case law to establish the correct employment status.  Of course, this is a proposal for consultation at present and there will no doubt be much detail to consider before it finally becomes law. 

Click here for the full consultation document.

If you would like further information then please contact John Harling on 0115 983 5580 or email jharling@edftax@co.uk.

The deadline for responding to the consultation is 12th October 2009.