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A City law firm has become the latest organisation to attack HMRC’s proposals for the construction industry.
Reynolds Porter Chamberlain has warned that the plans detailed in the Revenue’s False Self-Employment in Construction consultation document will hit the sector with a massive hike in taxes and red tape, with a greater number of workers subject to PAYE and higher rates of National Insurance.
The taxman’s paper suggests that to be deemed self-employed, an individual should have to satisfy at least one of three ‘reliable indicators, within the context of the construction industry, of a worker being in receipt of self-employment income’:
- Provision of plant and equipment: that a person provides the plant and equipment required for the job they have been engaged to carry out. This will exclude the tools of the trade, which it is normal and traditional in the industry for individuals to provide for themselves to do their job;
- Provision of all materials: that a person provides all materials required to complete a job; or
- Provision of other workers: that a person provides other workers to carry out operations under the contract and is responsible for paying them.
The proposals have been the subject of widespread condemnation from within the tax industry. They would result in construction firms having to pay NI in excess of £105 per week per 'affected' worker, according to Reynolds Porter Chamberlain.
Adam Craggs of the company's tax dispute resolution team remarked that, after many years of challenging the self-employment status of construction workers, ‘it seems that HMRC want to move the goalposts by introducing legislation to increase tax receipts… just as the construction industry is struggling to stay on its feet’.
He added: ‘Construction workers have nothing to gain from these proposals; they will be paying more in NICs, but won’t receive any employment rights in return.
‘HMRC argue that there is a problem with tax compliance in the construction sector, but their remedy is to introduce changes that will see many fully tax-compliant contractors and businesses suffer.’
Mr Craggs went on to warn that in many cases, the burden of applying the suggested criteria will fall to an employment agency or other intermediary who ‘simply won’t have sufficient knowledge of the facts… to apply the test properly’.
