The construction industry, CIS, employment status and popular urban myths – what’s true, and what’s false? Nick Pilgrim, Managing Director of EEBS offers some expert insight
One of the genuine pleasures of my job is to talk to people from all areas of the industry – experienced tradespeople, company owners big and small and people just starting out. Many of these interactions are at trade shows that we attend up and down the country, and there are plenty of common misunderstandings that have trundled around the industry for years, plus a few new entries. So, we often ask the question of delegates at trade shows “is the status of your self-employed workers secure?” – and after a brief look of horror, some of the most common responses are:
- “All my lads are registered with the CIS, so they must be classed as self-employed”
- “All my tradesmen give me an invoice – although we sometimes have to knock it up in the office for them”
- “All my guys quote me for work; we agree on a price and they invoice me either at the end of the job, or on an agreed drawdown”.
- “I don’t have to worry about that, my accountant takes care of it for me!”
All of these statements have a seed of plausibility, but they don’t all have a guarantee of winning the argument with HMRC.
So, before we consider each of the above scenarios, let’s consider how the Revenue decides if a tradesperson is employed, or self-employed. So, if:
- You use self-employed tradesmen without a written contract,
- You supply the majority of the materials, plant and equipment,
- You pay them an hourly/daily/weekly rate
- The sub-contractor cannot demonstrate that he can make a loss as well as a profit, or, the sub-contractor cannot demonstrate that he has an active portfolio of other clients,
…then HMRC are extremely likely to find that these tradesmen are your employees.
Now consider those four common responses we spoke about above, in line with how HMRC would view them:
- False – the classification of worker depends on the terms of the contract (written or implied) in conjunction with your working practices – not how the individual is taxed!
- False – An extremely thin and dubious attempt to establish the tradesman as genuinely in business of his own accord!
- True! Pretty much, as long as the arrangements are genuine, and correctly applied.
- Maybe! But how do you KNOW that your accountant has the correct procedures in place, are you seriously just taking their word for it? Has it been audited?
So, how do you remove uncertainty or avoid the obvious pitfalls? Is there an alternative?
Thankfully, yes! In spite of the ongoing attempts to limit the employment arrangements options for contractors, plus the various court cases that influence the argument (Uber, Pimlico Plumbers, etc) it is still entirely possible to guarantee your sub-contractors’ self-employed status – by either adopting option 3, or if that’s not practical then by using a specialist intermediary supplier – like EEBS!
But is it safe?
As in any industry, not all solution providers are equal. Yes, it is safe to outsource the supply of your sub-contractors, provided you take advice from a reputable, audited and compliant supplier (ideally one who has never had their model challenged by HMRC, who are audited by the UK’s leading construction tax specialists and whose compliance is backed by a comprehensive guarantee!).
Or you could just rely on the word of your accountant…
For further information on EEBS visit https://eebs.co.uk/
