If you’re reading this I imagine you either are, know or use a self employed contractor.
Unless you’ve had your head buried firmly in the sand over the past 18 months you’re likely to know that the construction industry’s contractors are increasingly under the watchful eye of Her Majesty’s Revenue & Customs who are constantly altering the landscape of self-employment laws.
It’s completely understandable that one might turn to a professional to get advice given these changes.
But those pro-active companies out there who have tried to get professional advice have unintentionally put a rather large target on their backs.
If you had the misfortune of listening to George Osborne’s entire budget speech in March you will know that at 31:50, (yes I did listen to all of it) he declares a clear intention to relentlessly clamp down on employment agencies, intermediaries and umbrella companies.
So the options are limited, if not fraught with danger should you require an expert to help navigate this complicated minefield of legal jargon and employment mumbo jumbo.
“The crack down is coming in the shape of HMRC challenging the self-employed status of individuals within a given company”
There will be plenty of companies out there reading this thinking that they’re safe because they don’t use any of the above.
This is where they catch you out again.
Unfortunately for those less inclined when it comes to taxes, HMRC’s motto “ignorance is not an excuse” rings true.
HMRC’s most recent figures show that the yield from investigations into the construction sector increased from £122m to £131m in 2013, an increase of 7 per cent and, with increased impetus, this will surely raise ever further.
The crack down is coming in the shape of HMRC challenging the self-employed status of individuals within a given company.
Unlike the Great British justice system - innocent until proven guilty - you’re guilty until proven innocent.
Intermediaries are naturally going to struggle to prove that the countless thousands of self-employed individuals on their books are indeed self-employed.
You would be forgiven at this point for almost giving up all hope of finding a solution to the problem of using the self-employed contractors entirely and just swallowing the PAYE pill to simply be done with the matter so that you can sleep at night.
What are your options?
Short of pointlessly handing over large sums of cash to our very own Treasury, or closing down your company entirely to avoid the headache (which has now become a migraine), what are your options?
- Use an umbrella company, which will all certainly be under new legislation by April 2016, at which point you will need to revisit the whole subject again.
- Use an intermediary, which as mentioned above are under heavy scrutiny already to prove each person’s self-employment and certainly does not mitigate all of your commercial risks.
- Turning your staff PAYE, the most expensive and usually unnecessary option.
- Use an employment law consultancy practice which specialises in advising you on how to be fully compliant, providing you with bespoke contracts, legal backing (should an HMRC challenge occur) and insurance for your liabilities, all for a fraction of the cost of the above options.
Who said that all your birthdays don’t come at once?
Alex Vernon-Smith is a senior consultant at Securitax