South: Grant Thornton warns on HMRC crackdown
The introduction of HM Revenue and Customs (HMRC) proposed new legislation on false self-employment will hugely damage the UK's construction businesses and industry as a whole, says accountants and business advisers, Grant Thornton UK LLP.
As the October 12 consultation deadline on the proposed legislation looms, Grant Thornton is urging construction businesses to respond to the planned scheme, which is likely to re-categorise a substantial number of labour-only subcontractors as deemed employees.
The government's consultation, (with a view to legislate) on what it calls 'false self-employment' aim's to ensure that construction workers are taxed appropriately. It estimates that as many as 300,000 workers in the construction industry are incorrectly claiming to be self-employed. The government's proposal would introduce three very simple tests. If a worker is unable to meet at least one of the three tests, the worker will be brought into the PAYE/NIC net. The proposed tests are:
Plant and Equipment – Does the worker provide all the tools necessary?
Provision of all materials – Does the worker provide all materials necessary to complete the job?
Provision of other workers – Does the worker employ the services of others to perform the job?
Ian Govier, Tax Partner at Grant Thornton said: "Our response to the consultation will express deep concerns about the proposed tests, which if used alone may lead to many truly self-employed individuals being brought within the PAYE/NIC net.
"The proposals also mean that within construction, there will now potentially be three types of worker for tax purposes; employee, self-employed worker and 'deemed employee'. Not only will this potentially increase the payroll burden for those paying 'deemed employees', there will also be an additional cost to the contractor in relation to employer's NIC.
"In addition, an extra level of complexity will arise if the worker has a number of different 'deemed employments' throughout the tax year, some of those employments perhaps occurring simultaneously.
" Many details of this proposal remain unclear such as how HMRC plan to ensure that contractors comply with the new legislation and how this will apply to workers engaged for minimum periods or have a number of other jobs. The self-employment issue is a minefield for both the construction industry and HMRC and we strongly encourage those in the construction industry to have their say."
