Employment Status – Popular Urban Myths! What’s True, and what’s False?

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 tradesmen is employed, or self-employed. So, if:

1. You use self-employed tradesmen without a written contract,
2. You supply the majority of the materials, plant and equipment,
3. You pay them an hourly/daily/weekly rate
4. 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 surmise that the employment status of these tradesmen is that they 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…

Contact the EEBS team for helpful and friendly advise info@eebs.co.uk or call 01245 493832

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