Specialist subcontractors could face extra costs for labour when plans to stop false self-employment through labour agency come into force on 6 April.
Last month the chancellor announced a further focus on self employment. The package of measures, to tackle tax avoidance, tax evasion, and fraud, could raise more than £9 billion over the next five years.
The government is consulting on strengthening existing legislation to ensure the correct amount of tax and national insurance is paid where a worker is believed to be a direct employee, with effect from April 2014.
The PAYE and NI rules currently accept that a self-employed worker finding work through an agency is still self-employed and should be taxed as such. But in the new tax year, if the worker personally carries out the work, or is involved in the provision of the services, payments will have to be payrolled, so the worker will have tax and employee NICs deducted at source. The agency will also become liable for employer NICs.
This means a worker’s own NI cost will then be three per cent higher than the nine per cent paid as a self-employed person, and the employing agency has a completely new liability at 13.8 per cent.
Steve Halcrow, FPDC’s executive director, said: “The new rules will affect temps and other self-employed workers using employment agencies. Recovery is in its early stages and any additional costs could jeopardise the viability of specialist contractors.”
Marcella Shone at Bond Dickinson said: “This is part of a general and on going campaign to extract more tax and national insurance contributions in relation to people who are being treated as self employed, when they are, in reality, employees. The danger is that some genuinely self employed people may be caught in the net.”
The Treasury estimates that around 300,000 workers in construction are self employed and it could be costing the government more than £380 million in lost revenue.
Getting your workers through others?
New tax legislation is set to increase labour costs.
A FREE to FPDC & AIS members webinar is being held on 30 January about the proposed new tax legislation that plans to stamp out agency self-employment.
New tax legislation will mean agencies and third parties supplying labour to construction companies will be have to pay PAYE and NIC (employers and employees) on all payments made to workers supplied through them.
Tax expert Liz Bridge will explain what these changes are likely to mean and how they will impact on interior contractors, there will also be Q & A session with Liz.
Reserve your webinar seat now CLICK HERE