22 Feb 2019
Tax avoidance and evasion have been hot topics with HMRC over the last few years. As part of their mission to crack down on lost revenues, HMRC has severely tightened up the rules around engaging workers on a self-employed basis.
Workers are learning through high profile cases such as with Uber and Deliveroo that they could be missing out on all the protections of being an employee. Imagine being off sick as a self-employed individual, not being paid, and realising that you might actually be entitled to statutory sick pay as an employee, surely this is worth them looking into?
Could your workers question you and if so, what could this mean for your business?
By incorrectly categorising workers your business could be at risk of underpaying National Insurance and not fulfilling your employer responsibilities in relation to sick pay, minimum wage, pensions and holidays. This may also lead to a HMRC enquiry which could be costly.
The arguments surrounding employed v self-employed are no longer as straight forward as who provides tools or individuals not having a fixed contract. HMRC are forever moving the goal posts which means each contract should be looked at in isolation. For example with Uber, the drivers have their own vehicle, freedom of choosing their own working hours, and discretion of which fares to take. On the face of this surely they are self-employed? Unfortunately not. Multiple tribunals found in favour of HMRC, weighted on the wording of contracts.
Seeing how easily you can fall foul, HMRC recommend employee status checks for each new contract undertaken.
Further complications are added if you are deemed to be an employment intermediary, as providing payments to ‘off-payroll workers’ comes with reporting requirements.
An intermediary is any person who is arranging for individuals to work for a third party or arranging for individuals to be paid by an intermediary for work done for a third party.
If deemed to be an intermediary you will need to submit a quarterly report to HMRC detailing all workers that have been provided to a client of yours, even if you have used several third parties to provide these individuals. The report is required to confirm why these workers have not been on your payroll, and could also include people who are under the Construction Industry Scheme (CIS) and have been paid as a sub-contractor by a third party. These types of arrangements can place you within a chain where confusion can arise over responsibilities.
Owning a business and engaging workers can lead to severe headaches if rules are not properly followed.
If you feel like you may need a review on the status of your workers, contact me or your local UHY adviser.