New rules on false self-employment should be delayed
HMRC’s consultation* on its proposed new rules closed on February 4th, but it has yet to publish the final version of the rules despite planning to implement these at the start of the new tax year, on April 6th – just over a fortnight away.
According to NoPalaver, this gives contractors, the businesses that use them and recruitment firms too little time to ensure that they comply with the rules before they are scheduled to go live.
Graham Jenner, director at NoPalaver, commented, “While temporary recruitment agencies, contractors and end users may know these rules are coming, they have no idea of what the fine print is going to be like. I would strongly urge HMRC to delay implementation for a year so that there is a sensible amount of time for the industry to prepare for the new rules properly.”
“What is needed is time for HMRC to communicate any changes to the rules and time for businesses to prepare for implementation.”
“As currently proposed, temporary employment agencies could find themselves accountable for the tax and National Insurance avoided by the workers. This is because the rules mean that whoever contracts with the end user will be responsible for the tax, unless they can show that the worker is not under anyone’s & lsquo;control, supervision or direction’ in their work. This puts a big due diligence burden on temporary employment agencies and they are going to need time to prepare for it.”
“HMRC might be expecting agencies to prepare for the incoming rule change by reviewing whether the contractors on their books might be affected. But the problem is that at the moment firms don’t know exactly what they need to look out for!”
“One area specifically being targeted is the construction sector. The proposals mean genuinely self-employed workers supplied via an intermediary will be taxed as if they were an employee. The end user might therefore insist the worker has their own limited company rather than contracting through an intermediary. The problem is that many construction workers might be reluctant to set up their own limited company as they may be worried about the level of paperwork involved, even though it may be less burdensome than they might expect if they work with a business like ours.”
“Alternatively, the end user will need to contract with the worker direct, on a self-employed basis. If they are going take that option, then they will need a robust “self-employed” contract, in order to eliminate the risks the intermediary previously removed.”
* HMRC consultation document, “Onshore Employment Intermediaries: False Self-Employment”