What does new quarterly reporting to tackle false self-employment mean for construction?

The new rule will put more pressure on construction firms to ensure their tax arrangements are in order and that workers are meeting the criteria for being either self-employed or employed.

The legislation is another step towards tackling ‘false self-employment’ in the construction industry and stopping companies employing staff via intermediaries to avoid national insurance contributions (NICs).

In the reports, agencies must declare any workers they are not running PAYE, giving their reasons for not doing so.

Stuart Crook/Edward Parker of Wellers Accountants said: “Inevitably these reports will highlight to HMRC who might not be paying NIC and tax and provide a trail to establish who should be paying it - whether it’s the worker them self, the intermediary or the construction company.”

HMRC has already collected over £130m this last year as a result of their tax compliance investigations in the construction sector. The new legislation is set to increase that yield even more.

They added: “Construction companies need to get the systems and processes in place that clearly establishes whether someone is an employee or a subcontractor, particularly when workers are supplied through agencies or intermediaries. These are some of the questions firms should be asking: Can the worker hire someone to do the work or engage helpers at their own expense?; Does the worker risk their own money?; Does the worker provide the main items of equipment they need to do their job, not just the small tools that many employees provide for themselves?; Do they agree to do a job for a fixed price regardless of how long the job may take?; Can the worker decide what work to do, how and when to do the work and where to provide the services?; do they regularly work for a number of different people?; and do they have to correct unsatisfactory work in their own time and at their own expense?

“If the answer is yes to all of these questions it will usually mean the worker is self-employed. If not, it is likely to mean that somebody, whether the firm or the intermediary, should be running PAYE on them.

“It is important to get the right contracts in place with all workers and intermediaries before the legislation comes into force next April. Ensure the wording of these contracts addresses the responsibilities outlined above and protects the construction firm against the possibility of an intermediary effectively passing the buck by saying they weren’t aware of how a worker was operating onsite.

“HMRC are just as likely to approach a construction firm as they are an intermediary to check a workers status. They are also able to penalise a construction firm if their records and contracts don’t prove that an intermediary has the final liability.

“It’s definitely going to be a case of ‘every man for himself’ under the new legislation.”