The Government has issued its intention to legislate against what it describes as 'false self-employment' in the construction industry.
In a consultative document it says that: 'False self-employment occurs where workers are treated as self-employed for income tax and National Insurance (NICs) despite the fact that the way in which the work is carried out on a day to day basis demonstrates that there is an employment relationship. There is evidence to show that a significant number of workers in the construction industry are engaged on the basis that they are self-employed, but are working under employment terms.' The Government has concluded that the best way to address this issue for income tax and NICs purposes is to introduce legislation which deems workers within the construction industry to be in receipt of employment income unless one of three tests apply. It describes these criteria as simple, clear and easy. One or more of the following tests must apply for the worker to be deemed self-employed: • Provision of plant and equipment – that a person provides the plant and equipment required for the job they have been engaged to carry out. This will exclude the tools of the trade which it is normal and traditional in the industry for individuals to provide for themselves to do their job; • Provision of all materials – that a person provides all materials required to complete a job; or • Provision of other workers – that a person provides other workers to carry out operations under the contract and is responsible for paying them. If the worker is deemed to be in receipt of employment income, Pay as You Earn (PAYE) and NICs will be due on the payment he receives. The consultation paper says: "However, it is intended that the introduction of the tests should not have an adverse impact on those genuinely carrying on a business and the test has been formulated to achieve this. The Government recognises that a flexible labour supply is important to the industry and that the self-employed workers who are carrying on a business make an important contribution to this." We intend to make representations via The Chartered Institute of Tax and would welcome feedback from both clients and other readers. The consultation closes on October 12, 2009. --