This has led to a call from one provider of accounting services to contractors to call for a delay in their implementation as contractors and recruitment agencies are not being given enough time to comply with them.
The rules are intended to protect workers, often in the construction sector, who are forced into mass-marketed self-employment schemes, often without their knowledge or understanding, and which are primarily aimed at reducing the financial obligations of their 'employers'. However, despite reassurances from HMRC, there are concerns that they will be so wide-reaching that they will emcompass legitimate contractors.
The Government's consultation on its proposed new rules closed on February 4 2014, but HM Revenue and Customs has yet to publish the final version of the rules despite intentions to implement them at the start of the new tax year, on April 6 – which is just over a fortnight away.
According to NoPalaver, this gives contractors, the businesses that use them and recruitment firms too little time to ensure that they comply with the rules before they are scheduled to go live.
Graham Jenner, Director at NoPalaver, said: “While temporary recruitment agencies, contractors and end users may know these rules are coming, they have no idea of what the fine print is going to be like. I would strongly urge HMRC to delay implementation for a year so that there is a sensible amount of time for the industry to prepare for the new rules properly.
“What is needed is time for HMRC to communicate any changes to the rules and time for businesses to prepare for implementation.
“As currently proposed, temporary employment agencies could find themselves accountable for the tax and National Insurance avoided by the workers. This is because the rules mean that whoever contracts with the end user will be responsible for the tax, unless they can show that the worker is not under anyone’s ‘control, supervision or direction’ in their work. This puts a big due diligence burden on temporary employment agencies and they are going to need time to prepare for it.
“HMRC might be expecting agencies to prepare for the incoming rule change by reviewing whether the contractors on their books might be affected. But the problem is that at the moment firms don’t know exactly what they need to look out for!
“One area specifically being targeted is the construction sector. The proposals mean genuinely self-employed workers supplied via an intermediary will be taxed as if they were an employee. The end user might therefore insist the worker has their own limited company rather than contracting through an intermediary. The problem is that many construction workers might be reluctant to set up their own limited company as they may be worried about the level of paperwork involved, even though it may be less burdensome than they might expect..
“Alternatively, the end user will need to contract with the worker direct, on a self-employed basis. If they are going take that option, then they will need a robust 'self-employed' contract, in order to eliminate the risks the intermediary previously removed.”
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Fear of the unintended consequences of 'false self-employment' rules - Shout99, Feb 2014
Rules on false self-employment go too far - Shout99, Feb 2014
Government fails to understand complexities of onshore intermediaries - Shout99, Feb 2014
Consultation on 'false self-employment' comes to an end - Shout99, Feb 2014
AS2013 (5): Government consults on 'false self employment' - Shout99, Dec 13
AS2013 (2): 'False self-employment' and the fear of unintended consequences - Shout99, Dec 2013
Onshore Employment Intermediaries: False Self-Employment - HMRC Consultation document.
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Susie Hughes © Shout99 2014